Too much discretion, they say.
Investors are less trustful of corporate reports since the global financial crisis with more than two-thirds saying they are more sceptical about the information companies provide, according to new research from ACCA (the Association of Chartered Certified Accountants).
Nearly two-thirds of the 300 investors surveyed in Understanding Investors: directions for corporate reporting have told ACCA that managers have too much discretion over the financial numbers they report and a sizeable majority of investors say they place more value on information generated from outside a company than on traditional corporate reports, such as the news and social media. Worryingly, 45% identified the annual report as being of no use.
There was a clear dichotomy for policy-makers created by quarterly reporting. It was seen as useful by 75% of respondents in terms of their own investment decisions, yet 65% agreed that it created short-termism in the market as a whole and distracted management. Almost half wanted to see mandatory quarterly reporting scrapped.
Key findings included:
· 69% of investors had become more sceptical about company-provided information since the global financial crisis
· 63% place greater value on information generated outside the company
· 63% believe management has too much discretion in the numbers it reports
· 63% believe the amount of information put out by companies has encouraged ‘hyper-investment’
· 46% believe mandatory quarterly reporting should be abandoned
· 93% expressed support for the concept of integrated reporting
The survey also revealed strong support for the role, of external assurance, which was seen as the main counterbalance to declining trust in company figures.
Only in areas like profit warnings and emerging risks and opportunities did investors believe speed of information outweighed assurance. And 41% wanted to see auditing being extended to quarterly reports.
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