Saying no to half-yearly reporting

AS a minority investor, I disagree with a proposal made by the recently unveiled Securities Commission Corporate Governance Blueprint 2011 for listed companies to conduct half-yearly reporting instead of on a quarterly basis.

Corporate governance is about accountability and relationship with the stakeholders. The purpose of corporate governance is to promote integrity, compliance, transparency, better corporate structure and management. It also minimises the risk of fraud and abuse of power.

From my experience, information is a critical part of making informed investment decisions. We need prompt and timely information from companies.

The current quarterly reporting practice provides us useful timely information. If listed companies feel that quarterly reporting runs the risk of providing only a short-term view, they can provide more information about their company in the notes to the quarterly result.

I also disagree with a theory that shorter time periods could lead to manipulative reporting. If the management has no integrity, the annual report can be manipulated by “creative accounting.” In some cases, even well-established audit firms could not detect any frauds in the accounting. How do you explain this?

Frequent reporting may be better than just annual reporting. A listed company developing a project, for example, will be able to inform the shareholders about the value of the land which will go up. If it announced the progress of the project on a quarterly basis, I think this will benefit all the shareholders as they are able to see the profits that the company is making. If the company chooses to report the profits, say half a year later, the minority shareholders may not notice the actual profits being made.

Big investors may have a better understanding of a company as they monitor it from time to time, compared with the minority shareholder as they have more resources to do so. Moreover, minority shareholders may not have the opportunity to participate in some of the company’s briefings unlike the fund managers who attend such briefings regularly. They will not mind if the company reports on a half-yearly basis as they have regular updates on the company.

I have confidence in the management of the company I invest in and I feel that it will do its best for the shareholders. There is no reason to distrust the quarterly results even if they are not audited by an external auditor. The management must come out with very good explanations should any anomaly occur in the quarterly result. If the management has integrity, the risk of giving false statements is very low as every listed company has a team of professionals managing it.

If you allow me to vote, I would say no to half-yearly reporting.