Why almost half of investors do not trust corporate reports
INVESTORS in Ireland and the UK are losing faith in corporate reports.
Nearly half of 300 investors in a recent survey said annual reports are "of no use".
The majority placed more value on information generated outside a company by news and social media sources than on traditional corporate reports.
Most of those surveyed by the Association of Chartered Certified Accountants (ACCA) said that managers have too much discretion over the financial numbers they report.
The ACCA said this decline in trust in corporate information means there is a bigger role for external assurers like auditors, who can help rebuild trust in company statements.
The long-established mandatory practice of issuing quarterly corporate reports also came under fire in the organisation's research.
Just under half of those surveyed believe mandatory quarterly reporting should be abandoned.
While three-quarters said these reports were useful for their own investment decisions, almost the same amount said the practice caused too much short-term investing and distracts management.
ACCA head Liz Hughes says the quarterly reporting issue shows just how fragmented investors views can be.
"Even individual investors are torn both ways – they want to consume quarterly reporting for their own self-interest, but they also recognise that this focus on shortening time horizons is damaging for the overall market's long-term interests.
"There is clearly a desire for regular reporting, but investors are aware of the outcome of that kind of financial information environment."
Those surveyed only valued speed of information over assuredness when it came to profit warnings and emerging risks and opportunities.