Investors have lost their trust in company reports

Investors in Ireland have lost their trust in official company reports, a new survey shows, with a sizeable majority of investors now placing more value on information generated from outside a company, such as newspapers and social media.

More than two-thirds of respondents to a survey conducted by the ACCA (Association of Chartered Certified Accountants) of investors in the UK and Ireland, said they are more sceptical about the information companies provide.

For nearly two-thirds of the 300 investors surveyed for “Understanding Investors: directions for corporate reporting”, managers have too much discretion over the financial numbers they report, and 45 per cent identified the annual report as being of “no use”.

There was a split in thinking for policy-makers created by quarterly reporting. It was seen as useful by 75 per cent of respondents in terms of their own investment decisions, yet 65 per cent agreed that it created short-termism in the market as a whole and distracted management. Almost half wanted to see mandatory quarterly reporting scrapped.

“The quarterly reporting issue shows just how fragmented views can be. Even individual investors are torn both ways - they want to consume quarterly reporting for their own self-interest, 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,” said Liz Hughes, head of ACCA Ireland, adding that this poses a “real challenge” to regulators and policy makers in terms of their approach,

Amongst the other findings of the report, almost two thirds of investors place greater value on information generated outside the company, while a similar amount believe that the amount of information put out by companies has encouraged ‘hyper-investment’ and 93 per cent 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.