Cutting quarterly reporting

MANY developed markets have done away with quarterly reporting by listed companies.

The European Union scrapped it about seven year ago, while in Hong Kong, quarterly reporting is now compulsory for firms listed on its junior board.

The US Securities and Exchange Commission is also reportedly reviewing the issue now, while closer to home, Singapore Exchange (SGX) said it plans to “make life easier” for listed companies - for the safer ones, at least.

In an announcement on Thursday, the Singapore bourse’s regulatory arm said it plans to end quarterly earnings reporting requirements that currently apply to all companies with a market capitalisation of at least S$75mil.

When the rule change takes effect on Feb. 7, only riskier companies will need to report earnings every three months. The exchange will also tighten other disclosure rules and introduce a new whistleblowing policy as part of efforts to protect investors.

So should Malaysia follow in the footsteps of its peer across the causeway?

Quarterly reporting has its merits and demerits and the debate on the issue is not a new one.

Proponents of the practice say it helps build trust between shareholders and the company’s management.

One obligation of a listed company is to provide transparent communications about issues that may affect the value of the company. Quarterly report provides this.

Investors, in turn, rely on timely information to make informed decisions.

Costs savings from accounting, legal, filing and others are often cited as reason to do away with the practice. But a bigger matter is perhaps the pressure on companies to “deliver” every quarterly. This can lead to an unhealthy preoccupation with short-term profits at the expense of long-term value building, some argue.

There is also worry that less frequent formal disclosure could disadvantage retail investors, who do not have access to information like the big boys.

And with stocks markets more volatile now, one would think that investors need all the information they can get their hands on to make the right decision.