Less may mean more – changes in corporate reporting requirements

We are in the midst of a busy reporting season and traditionally, sellside analysts have taken the view of "the more the merrier" when it comes to corporate reporting.

Yet a recent report from the Investment Association indicated that 30 FTSE 100 companies and 139 FTSE 250 companies have stopped publishing quarterly reports.

Given the European Commission proposal to amend the Transparency Directive to remove mandatory quarterly reporting requirements (which has already been adopted into UK law) is this a “carte blanche” for companies to communicate less with analysts and investors and other stakeholders?

Certainly not, in our view.

The rationale behind the EU change in quarterly reporting requirements was to encourage a greater focus on the company’s long-term strategic drivers, rather than short-term results. And this trend looks likely to be further boosted by the pending MiFID ll regulation, with the IR focus moving increasingly away from dealing with the sellside, which has a strong interest in results reporting, to more direct interface with the investors, which usually have a longer-term perspective.

The process for results reporting may in time become more virtual – with webcasts, digital content and video conferencing becoming more prominent – but, if anything, there is an overall need for more communications, rather than less, in order to set out the long-term strategy.

So rather than a Q3 trading update, perhaps we will begin to see companies hosting a seminar or publishing an in-depth update on one of its divisions? This would not only be of interest to investors but could provide the opportunity for a financial journalist to write something meaningful. And many of these stories could be highly relevant for other stakeholders, such as employees, regulators and government.

Far from leading to silence – less reporting could actually lead to an increase in overall communication.


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