Study on the impact of reporting frequency

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07 Jun, 2017

The CFA Institute, a global association of investment professionals, has published 'Impact of Reporting Frequency on UK Public Companies'.

The study looks at the effects on UK corporate investments and capital markets of moving to required quarterly reporting in 2007 and then dropping this requirement in 2014. The authors found that the frequency of financial reports had no material impact on levels of corporate investment. However, mandatory quarterly reporting was associated with an increase in analyst coverage and an improvement in the accuracy of analyst earnings forecasts.

One of the focus points of the study was to investigate whether quarterly reporting encourage short-term thinking. On this aspect the study notes:

In short, contrary to the rationale behind the 2013 amendments to the EU Transparency Directive, moving from quarterly to semiannual reporting is not an effective remedy for undue corporate emphasis on short-termism. If quarterly reporting leads company executives to focus on profits during the next three months, then a shift to semiannual reporting might plausibly lead corporate executives to focus on profits during the next six months—not on corporate investments with good prospects over the next three to five years.

Please click to access the full study from the CFA Institute website.

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