Ending Quarterly Reporting?

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We refer to the article on Business Times – SGX set to review mandatory quarterly reporting. Additionally, readers may refer to the screenshot below of an article posted on The Edge, where we were asked for our comments on this matter.


Given how many larger capital capital markets – namely UK and EU following the Hong Kong Stock Exchange, have been moving away from the practice of quarterly reporting, SGX has indicated readiness to move in the similar direction.

There have been changes in the international landscape. The United Kingdom and European Union have done away with quarterly reporting

– Tan Boon Gin, CEO of SGX Regulation

Currently, listed companies with a market capitalisation of at least S$75 million must report results on a quarterly basis. That is 70% of the 750 companies listed on the SGX. The proposed change is to increase the threshold of S$75 million to S$150 million, resulting in only 38% of the listed companies having to practice quarterly reporting.

Asides from the fact that abolishing the practice of quarterly reporting would bring cost savings in terms of compliance cost, those calling for quarterly reporting to be abolished point to the risk of of short-termism that quarterly reporting may encourage. Such short-termism results in companies focusing on generating profits in the next quarter instead of making investments with good 5-year prospects. Hence, to encourage such companies to take a long-term view, regulators have shifted corporate reporting from quarterly to semi-annually.

Will semi-annual reporting prevent companies from practicing short-termism? I am doubtful.

It would probably just mean that these companies shift their focus to 6 months instead of the usual 3 months. I find that if regulators wanted to prevent the problem of short-termism, they should target the incentive structures of companies rather than the reporting standards. Perhaps having bonuses tied to the management executives’s performance over the past 3 to 5 years, rather than just the last year. Such an approach would probably have a better effect encouraging executives to look beyond the short term to the longer term.

Furthermore, without quarterly reports of non-US companies, investors would attempt to gain information from assessing trends of US peer companies that reports quarterly. This just leads to mis-pricing of non-US companies in the near term. Studies have shown too how the stock price of non-US peer companies reporting semi-annually being two times more sensitive to US earnings news. After all foreign and US companies are never really perfect substitutes of each other.

If the intention of abolishing quarterly reporting is to prevent short-termism, one has to question if the new policy would truly solve the underlying issue.

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