Business | Investment
Why disclosures needn't be feared
Corporate governance and disclosure have become hot topics in the GCC of late.
- By Heidi Robinson, Special to Gulf News
- Published: 23:41 October 3, 2008
Corporate governance and disclosure have become hot topics in the GCC of late. Following a number of high-profile scandals, companies, especially those listed on regional indices, are being judged by their transparency and the quality of the information they disclose.
As we move into October, the publicly-owned companies will be announcing their third-quarter results. This disclosure which quantifies the financial performance and position of the company at the end of the three-month period is mandatory. However there will be great disparity in the level of disclosure, company-to-company and market-to-market.
All public companies will have to publish their balance sheets and income statement for the three-month period to the respective exchanges.
The Gulf stock markets have different deadlines for the announcement of results. Recent research by The National Investor and Hawkamah studied the results announcements of all GCC listed companies and the report found some markets better than others at meeting these deadlines.
Delays in announcement
All 64 companies listed in Abu Dhabi met the disclosure deadline of their first-quarter results in 2008. This contrasts with Dubai, where 10 out of the 57 listed companies failed to meet the 45-day disclosure deadline. Only one of the three late companies was fined by the Emirates Securities and Commodities Authority (ESCA) - for disclosing its results 17 days late. The average disclosure time for companies in the first-quarter in Abu Dhabi was 28.7 days against 36.2 days in Dubai.
In more mature, more liquid markets, such delays are rare. Most often companies in these markets also pre-announce their results dates directly to investors, on their website, and to the media and wider investment community. This is unusual in the Gulf; the TNI and Hawkamah research reveals that 91 per cent of GCC companies do not pre-announce their results date.
It is common for companies trading on more mature indices catering to more demanding, sophisticated investor bases to follow thorough standard announcement procedures. After publishing the results to the exchange, results are then sent to the media, in the form of a press release synopsis. At the same time, they are sent to the investment community in the form of financial statements and as investors' presentations which analyse the figures in more detail (for example year on year and quarter on quarter).
Operational background
On the same day, the Chief Financial Officer, often the Chief Executive Officer and perhaps an Investor Relations Manager hosts conference calls with the important media, investors and analysts to explain the results in more detail, giving operational background and drivers. Calls include a question-and-answer session so that any possible concerns can be brought before senior management on hand to respond. According to the TNI and Hawkamah research, only 2 per cent of companies hold analyst meetings or conference calls across all GCC-listed companies.
Organisations on the regional exchanges need to dedicate more attention and time to their quarterly results communications. Results provide regular opportunities to open dialogue with the investment community. It demonstrates a transparent, open management team and also offers opportunity to manage the messaging of the results and company strategy. Results time is a chance to remind investors and analysts of the strength of a company's equity offering.
Investors, especially those foreign to regional markets, feel more comfortable with a company that reports regularly and discloses in detail.
- The author is senior consultant, Capital MS&L
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