Share buyers saying getting rich not the main goal

massey-university

Fri Apr 07 2006 12:00:00 GMT+1200 (New Zealand Standard Time)

Share buyers saying getting rich not the main goal

Friday, 7 April 2006, 4:33 pm
Press Release: Massey University

The motivation behind economist Gareth Morgan's decision to give away the $47 million he made from the sale of shares in his son's company Trade Me may not be that unusual.

A study of New Zealanders who buy and sell shares has discovered that only a tiny minority do so in the hope of becoming wealthy.

The majority are primarily motivated simply a desire to be comfortable or for financial security for their families.

When Mr Morgan announced he would give his investment windfall to charity, he said he did not need the money and was happy with what he already had.

Now a study by Massey PhD student Peggy Chiu suggests kiwis who "play the market" are not just bunch of yuppies with dollar signs in their eyes.
Dr Chiu found that only 1.3 per cent of shareholders were solely motivated by a desire for prosperity or wealth maximisation.

“In fact, shareholders’ decision are driven principally by other values,” Dr Chiu says. “Almost half [are] motivated by the desire to be financially secure and content and to look after loved ones.”

She says when it comes to selecting companies to invest in these shareholders are guided by “others-oriented” values and fairness. They avoid companies they perceive as exploiting the gullible or disadvantaged.
Gambling businesses, tobacco manufacturers, fast-food companies, bioresearch companies and pharmaceutical businesses were cited as examples.

And a warning for the Enrons of the world: Some shareholders regarded honesty as so important that they will avoid investing in a business where they believe the honesty of a director of the board has been compromised.

Advertisement - scroll to continue reading

The same shareholders will intentionally seek to invest in companies perceived as making a contribution to society or making the world a better place through an environmental initiative.

“An unexpected finding is that shareholders place the responsibility of corporations to be accurate and honest in financial reporting ahead of their desire for long-term growth in share price and regular dividend income,” Dr Chiu says.

“The former is at the top and the latter two are listed eight and nineteenth respectively in a hierarchy of 31 issues of shareholders’ concerns.”

Dr Chiu thinks a possible reason why honesty and accuracy are regarded as of utmost importance is the awareness of the magnitude of damage possible in the event of fraudulent accounting or cover-ups because of what happened to
Enron and WorldCom in the United States, Parmalat in Italy or HIH Insurance in Australia.

She says the research demonstrates the range of factors contributing to shareholders’ investment decisionmaking. It also points the way to the development of tools to enable financial advisers to analyse clients personal values and that way understand their needs rather than categorising them solely according to risk values.

ENDS

Advertisement - scroll to continue reading

a.supporter:hover {background:#EC4438!important;} @media screen and (max-width: 480px) { #byline-block div.byline-block {padding-right:16px;}}

Using Scoop for work?

Scoop is free for personal use, but you’ll need a licence for work use. This is part of our Ethical Paywall and how we fund Scoop. Join today with plans starting from less than $3 per week, plus gain access to exclusive Pro features.

Join Pro Individual Find out more

Find more from Massey University on InfoPages.