Companies which provided information on an ‘as needed’ basis would be perceived as having better corporate governance, and would attract investment more easily.
The main findings of the survey of 300 investors are:
- 85% say that real-time data would improve their ability to react quickly
- 78% believed real-time reporting would enhance investment returns
- 75% would be prepared to pay more for real-time information to be externally assured.
- 73% would consider companies that report in real-time to have more robust corporate governance
- 71% say it would increase their understanding of corporate performance
- 70% say that companies reporting in real-time would have an advantage in attracting investment
- 65% say it would reduce costs of doing business with such companies
- 51% said it would increase liquidity in financial markets
There are however, downsides to such a move. Almost two-thirds of investors surveyed believed real-time reporting would create further financial instability and lead to an increased tendency to short-termism in financial markets. Most also thought an increase in market volatility was likely.
The areas where investors say they would value the ability to react faster are in emerging opportunities and profit warnings. With regards to liquidity and general financial information, assurance is believed to be more essential.
Ewan Willars, director of policy, ACCA, said: 'Our survey reveals a fascinating variety of opinion on the issue of real-time reporting. While there are various definitions of that term, we have taken it to mean disseminating company information when asked for, rather than at set time intervals, as at present.
'Investors clearly believe it would help their decision-making and give them greater understanding of companies. On the other hand they also accept that it could lead to increased instability and short-termism in markets.
'There would be huge questions for many audiences. Would regulators have the capacity to deal with it? Would auditors be able to move to a system of continuous, rather than periodic assurance? And would the companies themselves find they were disclosing information useful to competitors?
'But the fact is that with developments like Big Data and the widespread use of analytics, company finance departments and management teams are using real-time data internally. And yet there is a huge gap between these up-to-the minute operational processes and what is being reported and assured externally, which still takes weeks or even months. How long can the increasing gulf between the speed of internal and external reporting go on? This is a debate that needs to be had.
'One of the potential problems raised is whether increased pace of dissemination would mean accuracy could be lost. But, as one of the experts quoted in the report points out, retailers put out their Christmas sales figures early in the New Year and this is unaudited. Yet it is regarded as crucial to the perception of how those companies have performed. So to an extent this is already happening.'
The report identifies that companies already come under pressure from investors and regulators to speed up their closing process, the gap between year-end and publication of results. Those that take longer than the average are increasingly regarded as having inefficient systems. A move to real-time reporting could be a significant extension of this market sentiment.
The report is the third in a four-part project undertaken by ACCA in 2013 to understand the investor perspective on corporate reporting.
- The first two papers in the series, Understanding Investors: the changing landscape and Understanding Investors: directions for corporate reporting were published in June 2013 and are available via the 'Related Links' section, left of this article.