ASE fears for financial health of listed firms

The financial results of companies listed on the Athens Stock Exchange (ASE) took a sharp turn for the worse in 2002 in two ways. The first was an unprecedented «epidemic» of losses; the number of firms that reported negative results for 2002 neared 100 out of 370. The second way was the extent to which firms’ real financial status was «clouded over,» either via various accounting facilities afforded by the government, such as booking losses against reserves, or through accounting tricks. In short, the financial picture of firms as reported in their financial statements is not an accurate reflection of reality, and only ameliorated by auditors’ notes accompanying the statements. Stock market authorities are reported to be increasingly fearing a number of bankruptcies. The ASE recently adopted two measures that sparked extensive discussion: The first was to place 15 firms that reported losses in 2002 – either consecutively or in relation to turnover – in its «Under Supervision» category. Reactions were strong and it appears that many of the firms concerned have a point. The second move was a wave of correspondence with mainly lossmaking listed firms which were asked to explain their financial status and set out any omissions as well as plans to improve the situation. The answers provided were mostly along the same lines; as a rule, firms attributed problems to the global recession, a deteriorating domestic downturn, the rise in the value of the euro, high depreciation costs and high interest payments. Not one response contained any reference to poor or mistaken business decisions. Questions about accounting irregularities drew outrageous answers: «Everything will be put in order with the use of International Accounting Standards, starting this year.» Other respondents cited red tape. It would seem that most of the difficulties cited are valid, but it is equally valid to say that difficult circumstances create a series of chronic problems exacerbated by poor decisions. IT firm Unibrain attributed 2002 losses «exclusively to the size of debit exchange differences, due to significant fluctuations in the euro-dollar parity.» Office furniture firm SATO said its first annual reported loss since it was listed in 1990 was due to a 14.4 percent fall in sales, «the result of recession in Greece and abroad.» Carpet-maker Fintexport said, «Our company is basically an exporter and was directly affected by the global economic downturn.»