Despite expected growth in the use of financial technologies, many San Francisco Bay Area and Silicon Valley chief financial officers (CFOs) say they do not expect it to disrupt their business models.
Also, more than 40 percent of U.S. companies say they plan to boost wages and 38 percent will increase hiring in 2018 because of recent tax reform, according to results of the Duke University/CFO Global Business Outlook survey.
The survey's CFO Optimism Index - now at an all-time high -- is an accurate predictor of hiring plans and overall gross domestic product (GDP) growth.
66 percent of CFOs say corporate tax reform is helping their companies, with 36 percent saying the overall benefit is medium or large.
"Some benefits of tax reform are already being felt, while others will unfold over the next several years," said John Graham, a finance professor at Duke University’s Fuqua School of Business, and director of the survey. "Among other things, U.S. companies say tax reform will lead to greater profitability, investment, hiring and wages."
44 percent of U.S. companies plan to increase wages more than they would have without tax reform. Thirty-eight percent plan to increase employment and 36 percent will increase domestic investment. Thirty-one percent will increase cash holdings. Among companies with defined benefit pensions, 28 percent will increase pension contributions.
Among companies that plan to increase investment, 53 percent say the reduced corporate income tax rate is the reason why. Another 44 percent indicate immediate expensing of investment will fuel investment. The immediate expensing of investment only lasts for five years, however, and 37 percent of companies indicate they will shift investment so it will occur within the next five years, hence a portion of the increased investment is "borrowing from the future."
Due to tax reform, the effective (or average) tax rate for U.S. companies is expected to fall by about 5 percent, from 24 percent to 18.8 percent.
The Business Optimism Index in the U.S. increased to 71 on a 100-point scale this quarter, an all-time high.
"The extremely high level of business optimism is tied to the recently passed corporate tax reform," Graham said. "Our analysis of past results shows the CFO Optimism Index is an accurate predictor of future economic growth and hiring, therefore 2018 looks to be a very promising year."
The proportion of firms indicating they are having difficulty hiring and retaining qualified employees remains at a two-decade high, with 45 percent of CFOs calling it a top concern, up from 43 percent last quarter.
After difficulty finding the right employees, the next largest concern among CFOs is the cost of benefits, with health care costs expected to rise by more than 7 percent next year. Concern about government policies, regulations and data security are the next biggest concerns.
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