Corus of removing the requirement of publishing quarterly reporting has grown louder in recent past especially after Warren Buffett expressed support of its discontinuance. There are three supporting arguments:
- Too much information is resulting in stock volatility
- It is an unnecessary cost
- It leads management to focus on quarterly results instead of focusing on long term sustainability of an organization
All the above are quite valid arguments and in a perfect world where investors should only be investing in shares for long term, all the above arguments hold ground.
I somewhat have a different opinion on the regulation which came 2 decades ago in India.
1st – It was a way of sharing information by the management to the owners of the company. This official communication mode has become even more important in times when fake news and information can be transmitted across the world in a matter of seconds. I believe some information is better than No or misleading info.
2nd The cost has no doubt increased over the years for this exercise. When it all started it was a simple statement of business performance, something which companies prepares every month to track its performance (MIS). In this digital age getting a report should not be a such a big ask. What has made this exercise cumbersome is over-regulation and too many non-financial information. Examples: Sharing of promoter shareholding status, list of complaints, technical implementation of Accounting standards in reporting. We could save on audit and compliance cost if we can keep the information basic and as per companies MIS system.
3rd Investors invest in a business for long term and Board has to keep the investors updated on where the company is in achieving its goals. We have seen the maturity of an investor when we look at stocks of Amazon or Tesla or Facebook where even after losses the share prices have shown an upward trend.
4th Information helps other stakeholders including Governments, tax authorities, bankers authentic data to take decisions
Finally, in long run share prices will reflect underline business and if you believe in your investment and its management short volatility could be digested
