Reporting and Disclosure
Chapter 5
Reporting and Disclosure
Discussion Questions
1. Transparent financial reporting means that timely and accurate disclosures are made on all important matters affecting a company’s financial position and performance. It implies openness, communication, and accountability. Transparent financial reporting protects investors because nothing is hidden from them. Investors can better assess the risks of owning securities when information is truthful and complete. Transparent financial reporting also improves market quality. It enhances investor confidence. Open communication creates markets that are fair, orderly, efficient, and free from abuse and misconduct.
2. Four reasons why multinational corporations are increasingly being held accountable to constituencies other than traditional investor groups: a. The development and growth of the influence of trade unions. b. The growing recognition of the view that those who are significantly affected by decisions made by institutions in general must be given the opportunity to influence those decisions. c. The rejection by many governments of classical economic premises such as the belief that the regulated pursuit of private gain maximizes society’s welfare. d. The increasing concern over the social and economic impact of multinational corporations in host countries.
3. Arguments in favor of equal disclosure include: a. The absence of equal disclosure would create an unfair playing field for U.S. companies. Non-U.S. companies would have a competitive advantage in that they would not have to disclose the same information and so would not incur the costs involved in generating and publishing it. b. Investors in non-U.S. companies have the same information needs as those who invest in U.S. companies. A market concerned with investor protection would make sure that investors have timely and material information on all listed companies,
Reporting and Disclosure
Discussion Questions
1. Transparent financial reporting means that timely and accurate disclosures are made on all important matters affecting a company’s financial position and performance. It implies openness, communication, and accountability. Transparent financial reporting protects investors because nothing is hidden from them. Investors can better assess the risks of owning securities when information is truthful and complete. Transparent financial reporting also improves market quality. It enhances investor confidence. Open communication creates markets that are fair, orderly, efficient, and free from abuse and misconduct.
2. Four reasons why multinational corporations are increasingly being held accountable to constituencies other than traditional investor groups: a. The development and growth of the influence of trade unions. b. The growing recognition of the view that those who are significantly affected by decisions made by institutions in general must be given the opportunity to influence those decisions. c. The rejection by many governments of classical economic premises such as the belief that the regulated pursuit of private gain maximizes society’s welfare. d. The increasing concern over the social and economic impact of multinational corporations in host countries.
3. Arguments in favor of equal disclosure include: a. The absence of equal disclosure would create an unfair playing field for U.S. companies. Non-U.S. companies would have a competitive advantage in that they would not have to disclose the same information and so would not incur the costs involved in generating and publishing it. b. Investors in non-U.S. companies have the same information needs as those who invest in U.S. companies. A market concerned with investor protection would make sure that investors have timely and material information on all listed companies,