We are currently inundated with bad information. It is one of the reasons why the economy has been doing poorly. Our future depends on our decisions and bad information leads to bad ones being made.
Claims made about the cost of corporate equity and the returns that companies should therefore seek to make for their shareholders are prominent examples of misinformation. For example, according to KPMG, Britain’s five largest banking groups must “urgently tackle” low returns for shareholders. I am quoting from an article by Emma Dunkley in the Financial Times April 8 2015: “Big banks should become more profitable, says the report. It is claimed that value for shareholders is still being eroded six years after the crisis. None of the banks achieved a return on equity above 8 per cent last year, compared with an average of 11.6 per cent in 2009.” Read more