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PUBLIC BELIEVES FINANCIAL FRAUD RAMPANT,
BUT MAJORITY STILL HAVE CONFIDENCE IN THE STOCK
MARKET LONG TERM, SURVEY FINDS
NEW YORK, July 8 - The overwhelming majority of "Main Street" American investors (71%) believe the problems in financial reporting are widespread and not limited to a small number of companies or individuals. Most investors (69%) also agree that they "don't trust businesses' financial reporting any more."
Yet, despite the battered stock market and a crisis of confidence in the current market, a majority of investors (56%) still say that stocks will be an "excellent" or "good" investment long-term. Only 11% say the stock market will be a "poor investment" over the long haul.
These are the key findings of a nationwide survey of investors by the New York-based strategic market research and consulting firm Schulman, Ronca & Bucuvalas, Inc. (SRBI). The survey followed on the heels of a parade of revelations about financial wrongdoing involving Enron, Arthur Anderson, Adelphia Communications, WorldCom, Xerox and other companies.
The SRBI study interviewed by telephone a random national sample of 300 investors holding stocks, bonds, and mutual funds, June 28 - July 1.
Investor Reaction: Hold, Not Sell
While most investors (71%) are not planning to invest additional dollars in the market in the next few months, only a scant 6% say that they have bailed out of any stocks and mutual funds because of the ongoing scandals.
Investor portfolios were clearly hurt by the stock markets gyrations over the past year. More than 6 in 10 (61%) report that the value of their portfolios has decreased during this period. About 1 in 10 investors owned stocks in the companies involved in the financial scandals. About 2 in 3 (68%) feel that they'll have difficulty achieving their financial objectives over the next few years.
"The surprise here is not the crisis of confidence in the current market," commented Mark A. Schulman, president of Schulman, Ronca, & Bucuvalas, Inc. "More surprising and perhaps reassuring are that many Main Street investors still cling to the traditional notion that the stock market is the place to be over the long term. In spite of the battered state of their portfolios and ongoing scandals, many investors are still able to take a more positive longer-term view."
Who's to Blame?
As President George W. Bush prepares his speech on corporate wrongdoing, the investing public places blame for the scandals squarely on shoulders of high-level corporate executives (80% "great deal of blame"), corporate boards (53% "great deal of blame") and accounting firms (51% "great deal of blame"). As the political jousting begins over who's responsible, few investors at this point blame President Bush (14%), the U.S. Congress (17%), the Clinton Administration (17%), or government agencies that regulate the securities markets (30%).
While less than 3 in 10 (28%) blame the brokerage firms "a great deal" for the scandals, a majority (57%) say that they have little (39%) or no (18%) confidence in the recommendations of brokerage firms.
Solutions: Prosecute Corporate Officers
As for solutions, almost all investors believe that prosecuting corporate officers for "financial fraud" would be a "very" (69%) or "somewhat effective" (23%) solution. About 7 in 10 (71%) also believe that "making it easier for investors to sue corporate officers for financial fraud" would be "very" (41%) or "somewhat effective" (30%) in combating wrongdoing.
Almost all investors (92%) want executive managers of corporations to "begin speaking out more strongly" about this problem.
The investing public is more divided over the need for more government oversight. Just less than half (49%) say that the government should be more involved "in oversight of financial reporting by companies," while 40% say that the "business community should put its own house in order, without more government involvement."
Investors do want more government oversight of the accounting industry. Almost 9 in 10 investors (88%) agree "the accounting industry needs to be watched more closely by the U.S. Securities and Exchange Commission."
"Clearly, investors are not in a forgiving mood when it comes to solutions to financial fraud," Schulman commented. "A very effective solution will be to make corporate officers criminally liable for financial fraud committed by the company."
Methodology
This random national survey of 300 persons who are invested in stocks, bonds, mutual funds was conducted by Schulman, Ronca, & Bucuvalas, Inc. (SRBI), a financial strategy consultancy based in New York City. Interviewing, by telephone, was conducted June 28 through July 1, 2002. Households were screened to determine if they qualified. The sampling error is approximately +/- 5.7 percentage points at the 95% confidence level. Random surveys are also subject to other sources of error. A complete set of interview questions can be found below.
About SRBI
Schulman, Ronca, & Bucuvalas, Inc. is a full-service global strategic market and opinion research firm. Founded in 1981, SRBI specializes in banking and finance, telecommunications, health care, media, energy, transportation, customer satisfaction, automotive, insurance, public policy, and opinion surveys. SRBI maintains offices in New York City, metro Washington, DC, Fort Myers, FL, West Long Branch, NJ and Chattanooga, TN. The firm employs 105 full-time staffers and 550 field staff. Through its affiliation with Global Market Research, an international consortium, the firm has research partners in 30 countries.
Q1. Overall, do you think that the U.S. economy is getting better, worse,
or staying about the same?
300
Tot/Ans %/Ans
1. Getting better, 44 14.7
2. Getting worse, 123 41.0
3. Staying about the same? 127 42.3
4. (VOL) Not sure/Don't know 6 2.0
5. (VOL) Refused 0 0.0
Q2. Thinking over the past year, has the overall value of your
investments increased, decreased or remained about the same?
300
Tot/Ans %/Ans
1. INCREASED 35 11.7
2. DECREASED 183 61.0
3. Stayed about the same 79 26.3
4. (VOL) Not sure/Don't know 3 1.0
5. (VOL) Refused 0 0.0
Q2a. Has the value of your investments increased a great deal, or only somewhat?
35
Tot/Ans %/Ans
1. A great deal 2 5.7
2. Somewhat 31 88.6
3. (VOL)Not sure/Don't know 2 5.7
4. (VOL) Refused 0 0.0
Q2b. Has the value of your investments decreased a great deal, or only somewhat?
183
Tot/Ans %/Ans
1. A great deal 78 42.6
2. Somewhat 100 54.6
3. (VOL) Not sure/Don't know 5 2.7
4. (VOL) Refused 0 0.0
Q3. How much attention have you paid these types of stories--a great deal
of attention, some, not too much or not at all?
300
Tot/Ans %/Ans
1. A great deal 146 48.7
2. Some 102 34.0
3. Not too much 32 10.7
4. Not at all 16 5.3
5. (VOL) Not sure/Don't know 3 1.0
6. (VOL) Refused 1 0.3
Q4. Do you believe that these problems are limited to a small number of
companies or individuals, OR are the problems more widespread?
300
Tot/Ans %/Ans
1. Problems are limited to a small number of 73 24.3
companies
2. Problems are more widespread 213 71.0
3. (VOL) Not Sure/Don't know 14 4.7
4. (VOL) Refused 0 0.0
Q4a. Are they...(READ LIST)
213
Tot/Ans %/Ans
1. Much more widespread, or 113 53.1
2. Somewhat widespread? 91 42.7
3. (VOL) Not sure/Don't know 9 4.2
4. (VOL) Refused 0 0.0
Q5. Have you recently sold any stocks or stock mutual funds because of
concerns raised by the recent financial scandals?
300
Tot/Ans %/Ans
1. Yes, Did sell 17 5.7
2. No, Did not sell 279 93.0
3. (VOL) Not sure/Don't know 4 1.3
4. (VOL) Refused 0 0.0
Q6. How likely are you to purchase any stocks or stock mutual funds in
the next few months? Are you...(READ LIST)
300
Tot/Ans %/Ans
1. Very likely, 38 12.7
2. Somewhat likely, 46 15.3
3. Not too likely , or 76 25.3
4. Not at all likely? 136 45.3
5. (VOL) Not Sure/Don't know 3 1.0
6. (VOL) Refused 1 0.3
Q7. Did you own stock in any of the companies that have been involved in
any of the financial scandals?
300
Tot/Ans %/Ans
1. Yes, did own 31 10.3
2. No, did not own 242 80.7
3. (VOL) Not Sure/Don't know 27 9.0
4. (VOL) Refused 0 0.0
Q8a. (Who do you feel is to blame for these problems...)
A) ACCOUNTING FIRMS
Do you blame them...(READ LIST)
300
Tot/Ans %/Ans
1. A great deal, 154 51.3
2. Somewhat, 113 37.7
3. Not very much, or 16 5.3
4. Not at all? 10 3.3
5. (VOL) Not sure/Don't know 5 1.7
6. (VOL) Refused 2 0.7
Q8b. (Who do you feel is to blame for these problems...)
B) GOVERNMENT AGENCIES THAT REGULATE SECURITIES MARKETS
Do you blame them...(READ LIST)
300
Tot/Ans %/Ans
1. A great deal, 91 30.3
2. Somewhat, 125 41.7
3. Not very much, or 32 10.7
4. Not at all? 37 12.3
5. (VOL) Not sure/Don't know 15 5.0
6. (VOL) Refused 0 0.0
Q8c. (Who do you feel is to blame for these problems...)
C) PRESIDENT BUSH AND HIS ADMINISTRATION
Do you blame them...(READ LIST)
300
Tot/Ans %/Ans
1. A great deal, 41 13.7
2. Somewhat, 73 24.3
3. Not very much, or 58 19.3
4. Not at all? 120 40.0
5. (VOL) Not sure/Don't know 7 2.3
6. (VOL) Refused 1 0.3
Q8d. (Who do you feel is to blame for these problems...)
D) THE U.S. CONGRESS
Do you blame them...(READ LIST)
300
Tot/Ans %/Ans
1. A great deal, 50 16.7
2. Somewhat, 117 39.0
3. Not very much, or 46 15.3
4. Not at all? 76 25.3
5. (VOL) Not sure/Don't know 9 3.0
6. (VOL) Refused 2 0.7
Q8e. (Who do you feel is to blame for these problems...)
E) FORMER PRESIDENT CLINTON AND HIS ADMINISTRATION
Do you blame them...(READ LIST)
300
Tot/Ans %/Ans
1. A great deal, 52 17.3
2. Somewhat, 100 33.3
3. Not very much, or 43 14.3
4. Not at all? 86 28.7
5. (VOL) Not sure/Don't know 18 6.0
6. (VOL) Refused 1 0.3
Q8f. (Who do you feel is to blame for these problems...)
F) COMPANY BOARDS OF DIRECTORS
Do you blame them...(READ LIST)
300
Tot/Ans %/Ans
1. A great deal, 158 52.7
2. Somewhat, 108 36.0
3. Not very much, or 16 5.3
4. Not at all? 7 2.3
5. (VOL) Not sure/Don't know 10 3.3
6. (VOL) Refused 1 0.3
Q8g. (Who do you feel is to blame for these problems...)
G) HIGH LEVEL EXECUTIVES AT THESE COMPANIES
Do you blame them...(READ LIST)
300
Tot/Ans %/Ans
1. A great deal, 239 79.7
2. Somewhat, 44 14.7
3. Not very much, or 9 3.0
4. Not at all? 3 1.0
5. (VOL) Not sure/Don't know 4 1.3
6. (VOL) Refused 1 0.3
Q8h. (Who do you feel is to blame for these problems...)
H) BROKERAGE FIRMS WHICH SELL STOCKS
Do you blame them...(READ LIST)
300
Tot/Ans %/Ans
1. A great deal, 85 28.3
2. Somewhat, 133 44.3
3. Not very much, or 33 11.0
4. Not at all? 30 10.0
5. (VOL) Not sure/Don't know 17 5.7
6. (VOL) Refused 2 0.7
Q8i. (Who do you feel is to blame for these problems...)
I) LARGE INSTITUTIONAL INVESTORS
Do you blame them...(READ LIST)
300
Tot/Ans %/Ans
1. A great deal, 62 20.7
2. Somewhat, 147 49.0
3. Not very much, or 38 12.7
4. Not at all? 30 10.0
5. (VOL) Not sure/Don't know 23 7.7
6. (VOL) Refused 0 0.0
Q8j. (Who do you feel is to blame for these problems...)
J) INDIVIDUAL INVESTORS
Do you blame them...(READ LIST)
300
Tot/Ans %/Ans
1. A great deal, 11 3.7
2. Somewhat, 72 24.0
3. Not very much, or 68 22.7
4. Not at all? 137 45.7
5. (VOL) Not sure/Don't know 11 3.7
6. (VOL) Refused 1 0.3
Q8k. (Who do you feel is to blame for these problems...)
K) THE NEWS MEDIA WHO REPORT ON BUSINESS AND FINANCE
Do you blame them...(READ LIST)
300
Tot/Ans %/Ans
1. A great deal, 45 15.0
2. Somewhat, 83 27.7
3. Not very much, or 44 14.7
4. Not at all? 119 39.7
5. (VOL) Not sure/Don't know 7 2.3
6. (VOL) Refused 2 0.7
Q9. Some brokerage firms recommend stocks and other investments. How
much confidence do you have in their recommendations? Do you have a
great deal of confidence, some confidence, not much confidence or none
at all?
300
Tot/Ans %/Ans
1. A great deal 13 4.3
2. Some 99 33.0
3. Not much 116 38.7
4. None at all 54 18.0
5. (VOL) Depends on firm 9 3.0
6. (VOL) Not sure/Don't know 9 3.0
7. (VOL) Refused 0 0.0
Q10. How much confidence do you have that you can make money in stocks
and stock mutual funds in the next year or so? Do you have...(READ LIST)
300
Tot/Ans %/Ans
1. A great deal of confidence, 27 9.0
2. Some confidence, 118 39.3
3. Not much confidence, or 108 36.0
4. No confidence at all? 41 13.7
5. (VOL) Not sure/Don't know 6 2.0
6. (VOL) Refused 0 0.0
Q11. Thinking about your longer-term goals, say in the next five to ten
years, do you feel that stocks and mutual funds will be an excellent
investment, a good investment, just fair investment or a poor investment.
300
Tot/Ans %/Ans
1. Excellent investment 34 11.3
2. Good investment 135 45.0
3. Fair investment 87 29.0
4. Poor investment 32 10.7
5. (VOL) Not sure/Don't know 11 3.7
6. (VOL) Refused 1 0.3
Q12. Overall how difficult do you think it will be for you to obtain your
investment objectives over the next few years? Will it be...(READ LIST)
300
Tot/Ans %/Ans
1. Very difficult, 38 12.7
2. Somewhat difficult, 166 55.3
3. Not too difficult, or 78 26.0
4. Not at all difficult? 11 3.7
5. (VOL) Not sure/Don't know 6 2.0
6. (VOL) Refused 1 0.3
Q13. Do you believe that government regulators need to be MORE involved
in oversight of financial reporting by companies, OR should the business
community be allowed to put its OWN house in order, without more
government involvement?
300
Tot/Ans %/Ans
1. Need for government oversight 146 48.7
2. Business community should put own house in order 119 39.7
3. (VOL) Not sure/Don't know 30 10.0
4. (VOL) Refused 5 1.7
Q14a. (Here are some solutions to the problem of financial fraud that have
been proposed.)
A) CLOSER U.S. SECURITY AND EXCHANGE COMMISSION SCRUTINY OF FINANCIAL
REPORTING BEING DONE BY COMPANIES
Would this be...(READ LIST)
300
Tot/Ans %/Ans
1. Very effective, 106 35.3
2. Somewhat effective, 137 45.7
3. Not too effective, or 30 10.0
4. Not at all effective? 12 4.0
5. (VOL) Not sure/Don't know 15 5.0
6. (VOL) Refused 0 0.0
Q14b. (Here are some solutions to the problem of financial fraud that have
been proposed.)
B) MAKING IT EASIER FOR INVESTORS TO SUE CORPORATE OFFICERS FOR FINANCIAL
FRAUD.
Would this be...(READ LIST)
300
Tot/Ans %/Ans
1. Very effective, 124 41.3
2. Somewhat effective, 89 29.7
3. Not too effective, or 46 15.3
4. Not at all effective? 30 10.0
5. (VOL) Not sure/Don't know 11 3.7
6. (VOL) Refused 0 0.0
Q14c. (Here are some solutions to the problem of financial fraud that have
been proposed.)
C) HAVING CORPORATE OFFICERS PROSECUTED BY THE LAW FOR FINANCIAL FRAUD
Would this be...(READ LIST)
300
Tot/Ans %/Ans
1. Very effective, 207 69.0
2. Somewhat effective, 68 22.7
3. Not too effective, or 15 5.0
4. Not at all effective? 3 1.0
5. (VOL) Not sure/Don't know 6 2.0
6. (VOL) Refused 1 0.3
Q15a. (I am going to read you a list of statements and I'd like you to
tell me the extent to which you agree or disagree with each one.)
A) I AM SCARED TO MAKE ANY MORE INVESTMENTS IN THE STOCK MARKET BECAUSE OF
THE ON-GOING SCANDALS.
Would you say that you...(READ LIST)
300
Tot/Ans %/Ans
1. Agree strongly with this statement, 80 26.7
2. Agree somewhat, 70 23.3
3. Disagree somewhat, or 68 22.7
4. Disagree strongly? 72 24.0
5. (VOL) Not sure/Don't know 9 3.0
6. (VOL) Refused 1 0.3
Q15b. (I am going to read you a list of statements and I'd like you to
tell me the extent to which you agree or disagree with each one.)
B) THE ACCOUNTING INDUSTRY NEEDS TO BE WATCHED MORE CLOSELY BY THE U.S.
SECURITIES AND EXCHANGE COMMISSION.
Would you say that you...(READ LIST)
300
Tot/Ans %/Ans
1. Agree strongly with this statement, 189 63.0
2. Agree somewhat, 74 24.7
3. Disagree somewhat, or 16 5.3
4. Disagree strongly? 13 4.3
5. (VOL) Not sure/Don't know 8 2.7
6. (VOL) Refused 0 0.0
Q15c. (I am going to read you a list of statements and I'd like you to
tell me the extent to which you agree or disagree with each one.)
C) BECAUSE OF ALL THE NEWS ABOUT FINANCIAL FRAUD I WILL BE RELUCTANT TO
INVEST A LOT IN THE STOCK OF ANY ONE COMPANY IN THE FUTURE.
Would you say that you...(READ LIST)
300
Tot/Ans %/Ans
1. Agree strongly with this statement, 170 56.7
2. Agree somewhat, 60 20.0
3. Disagree somewhat, or 38 12.7
4. Disagree strongly? 25 8.3
5. (VOL) Not sure/Don't know 6 2.0
6. (VOL) Refused 1 0.3
Q15d. (I am going to read you a list of statements and I'd like you to
tell me the extent to which you agree or disagree with each one.)
D) I DON'T TRUST BUSINESS' FINANCIAL REPORTING ANY MORE
Would you say that you...(READ LIST)
300
Tot/Ans %/Ans
1. Agree strongly with this statement, 98 32.7
2. Agree somewhat, 107 35.7
3. Disagree somewhat, or 62 20.7
4. Disagree strongly? 31 10.3
5. (VOL) Not sure/Don't know 1 0.3
6. (VOL) Refused 1 0.3
Q15e. (I am going to read you a list of statements and I'd like you to
tell me the extent to which you agree or disagree with each one.)
E) THE PROBLEM OF FINANCIAL FRAUD IN U.S. COMPANIES HAS BEEN GREATLY
EXAGGERATED BY THE MEDIA.
Would you say that you...(READ LIST)
300
Tot/Ans %/Ans
1. Agree strongly with this statement, 34 11.3
2. Agree somewhat, 83 27.7
3. Disagree somewhat, or 73 24.3
4. Disagree strongly? 104 34.7
5. (VOL) Not sure/Don't know 6 2.0
6. (VOL) Refused 0 0.0
Q15f. (I am going to read you a list of statements and I'd like you to
tell me the extent to which you agree or disagree with each one.)
F) THE SENIOR EXECUTIVES IN MAJOR COMPANIES NEED TO SPEAK OUT MORE STRONGLY
AGAINST FINANCIAL FRAUD.
Would you say that you...(READ LIST)
300
Tot/Ans %/Ans
1. Agree strongly with this statement, 225 75.0
2. Agree somewhat, 52 17.3
3. Disagree somewhat, or 11 3.7
4. Disagree strongly? 4 1.3
5. (VOL) Not sure/Don't know 6 2.0
6. (VOL) Refused 2 0.7
Q15g. (I am going to read you a list of statements and I'd like you to
tell me the extent to which you agree or disagree with each one.)
G) CONGRESS WILL NOT DEAL WITH THE PROBLEM OF FINANCIAL FRAUD BECAUSE LARGE
CORPORATIONS HAVE TOO MUCH INFLUENCE IN WASHINGTON.
Would you say that you...(READ LIST)
300
Tot/Ans %/Ans
1. Agree strongly with this statement, 149 49.7
2. Agree somewhat, 84 28.0
3. Disagree somewhat, or 39 13.0
4. Disagree strongly? 21 7.0
5. (VOL) Not sure/Don't know 6 2.0
6. (VOL) Refused 1 0.3
Q16. What is your age? (READ CATEGORIES IF NECESSARY)
300
Tot/Ans %/Ans
1. Under 30, 29 9.7
2. 30 - 39, 57 19.0
3. 40 - 49, 78 26.0
4. 50 - 59, 59 19.7
5. 60 - 69, or 41 13.7
6. 70 or older? 35 11.7
7. (VOL) Refused 1 0.3
Q17. What is your household's total annual income, before taxes, from
all sources? Is it...(READ LIST)
300
Tot/Ans %/Ans
1. Under $50,000, 92 30.7
2. $50,000 to just under $100,000, 121 40.3
3. $100,000 to just under $250,000, 42 14.0
4. $250,000 to just under $500,000, or 7 2.3
5. $500,000 or more? 6 2.0
6. (VOL) Not sure/Don't know 3 1.0
7. (VOL) Refused 29 9.7
Q18. By investable assets I mean your holdings in stocks, bonds, mutual
funds, CDs or bank accounts. Please include your assets in employer-
sponsored retirement plans such as 401(k) or 403(b) plans, but DO NOT
INCLUDE the value of any real estate or businesses that you own.
Would you say it is...(READ LIST)
300
Tot/Ans %/Ans
1. Under $50,000, 109 36.3
2. $50,000 to just under $100,000, 65 21.7
3. $100,000 to just under $250,000, 51 17.0
4. $250,000 to just under $500,000, 22 7.3
5. $500,000 to $1 million, 8 2.7
6. $1 million but less than $5 million, or 9 3.0
7. $5 million or more? 1 0.3
8. (VOL) Refused 35 11.7
Financial Fraud
Rampant
International Business
Entitites
and Family Policy
Among New Yorkers
from Sept 11 Attacks
Credibility of
Accounting Firms
President of AAPOR
in North America
and Europe
Deficiency Diseases
in America
Researcher Survey
Youth (SAY)
to Corporate Risk
Management
is a Myth
and Reality
of Speeding
Women
Crime Victims
Awareness of
Genetic Issues
