Benefits of information disclosure

WITH globalisation, information is flowing across capital markets such that its relevance can never be underrated. However, investors should note that obtaining comprehensive, accurate and timely material company information can be extremely difficult unless there is full disclosure. As a result, it is a requirement that all listed companies disclose all material information to enable the investing public to make informed investment decisions. Armed with adequate information, an investor has better control over his/her investment decisions. Some of the benefits of information disclosure to investors include:

◆ Determining company performance - Investor information is important in determining the financial health of a company. The role of information disclosure is to make investors aware of all relevant details that may have an impact on the value of the business they are invested in.

◆ Promoting transparency - Investor information also promotes transparency in the underlying business operations. The spread of inaccurate and manipulative information by unscrupulous people becomes scarce when there is transparency.

◆ Possibility of high returns at calculated risk - Potential optimum returns can only be ascertained when comprehensive information is availed to the investing public on time. Informed decision making can also afford investors an opportunity to minimise potential risks through making investments without full knowledge of the associated risks.

◆ Reducing information asymmetry - This occurs when one party to a transaction possesses more material information than the other party. Information dissemination ensures balanced information availability to all market participants.

◆ Secure new investors - When companies provide full information regarding their business operations, there is high probability of securing new investors. A record of strong investor relations coupled with a documented history of the company’s performance often tend to attract more investors.

◆ Encourage evaluation- Full information disclosure ensures that executives are consistently evaluating themselves and the company on an ongoing basis. Company executives are kept accountable to themselves and the investors