Expanding corporate disclosure: discussion

Abstract

Over the years, the information provided by business organisations has increased in quantity, quality, variety, and timeliness. Companies are required to be more responsive to the needs of the investment community for relevant and reliable information on their activities, strategies and plans. Securities regulation has moved from a government-administered, merit-based system to a market-driven, disclosure-based system for raising resources in the capital market. The availability of information to the investing public is critical to the efficient functioning of the capital markets. In fact, capital markets can be distinguished by the quality of information they provide. Evidence from academic research suggests that firms that provide superior disclosures reduce their cost of capital and their stocks have better liquidity. Voluntary disclosure plays a valuable role in the context of rapid advances in manufacturing technology, high obsolescence rates for products, global competition in capital, product and labour markets, and significant progress in information processing methods. In general, better disclosure enhances the quality and level of monitoring of the firm by shareholders, and strengthens corporate governance. However, on the reverse is the consideration that providing disclosures can invite negative competitor reaction, especially in industries where information is highly sensitive; providing disclosures can lead to greater shareholder litigation. The Round Table discussion on Expanding Corporate Disclosure aimed at understanding the role of disclosure in capital and other markets, and understanding the concerns and constraints of companies in improving the quantity and quality of disclosure. A panel with representatives from corporate houses, the Big 4 accounting firms, the government, regulatory bodies and academia participated in the Round Table discussion.