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A SURVEY OF SOPHISTICATED NEW ZEALAND USERS OF FINANCIAL STATEMENTS AND THEIR INTERIM REPORTING REQUIREMENTS (SEASONALITY, FORECASTS)
Abstract
Event studies on quarterly (interim) financial reports have found evidence that contradicts the semi-strong form of the efficient market hypothesis. Normative studies and regulatory body statements on interim reporting have emphasized the predictive function; estimating annual earnings, making forward projections and identifying turning points. With the growth in sophistication of financial markets many investors have abrogated their investment analysis to surrogates, investment sophisticates such as analysts and brokers. There is compelling evidence that sophisticates estimate annual earnings on the basis of interim disclosures and that individual investors, receiving investment advisory services, bring the results of professional analysis to bear on the investment decisions. This study surveyed New Zealand sophisticates to identify the interim accounting stimuli which sophisticates used in their investment analysis. This study was designed to make a significant contribution to a theory for interim reporting which will make subsequent event studies more meaningful. New Zealand sophisticates manifest an awareness of the predictive function of interim financial reports. The respondents preferred more timely, credible and frequent interim reports prepared on a basis consistent with annual reports and with disclosure of seasonal factors. These preferences should be accorded the urgency they deserve if accounting information is to continue to be considered reliable by investors. The anachronism is that the glossy annual reports, having little significant information content, continue to draw the attention of standard setting bodies while the financial report replete with information of value--the interim--generally escapes the attention of standard setting bodies. This is alarming because analysts and brokers use interim data to re-cast projected annual earnings and perhaps this interim data has not been prepared on a consistent and comparable basis between periods and between firms. The accounting profession has a duty, perhaps a fiduciary responsibility, to ensure interim reports are reliable, as the impact of investors making investment decisions based upon projections of earnings which in turn were calculated using possibly unreliable interim reports is extremely serious.
Subject Area
Accounting
Recommended Citation
BURROWES, ASHLEY WAYNE, "A SURVEY OF SOPHISTICATED NEW ZEALAND USERS OF FINANCIAL STATEMENTS AND THEIR INTERIM REPORTING REQUIREMENTS (SEASONALITY, FORECASTS)" (1986). ETD collection for University of Nebraska-Lincoln. AAI8624581.
https://digitalcommons.unl.edu/dissertations/AAI8624581