Stimulating change in financial communication

    March 14, 2006

Two interesting business events that might appear separate but are in fact closely related:

From BBC News:

Shares in the London Stock Exchange (LSE) have jumped by 30% on Monday following speculation of a bid war. On Friday the LSE rejected a 2.43bn ($4.2bn) bid from the New York-based exchange Nasdaq. This sparked speculation that the New York Stock Exchange (NYSE) and Euronext would table counter-bids. >> Full story.

From the Financial Times:

Corporate America is becoming disenchanted with the increasingly discredited practice of feeding company profit forecasts to investors. A consensus is forming among chief executives, regulators and analysts against the quarterly ritual that encourages management to pursue narrow, short-term targets at the expense of more sustainable growth. >> Full story.

There is a growing trend among publicly-listed companies in the US to exercise greater transparency (that word again) in a marketplace where some regulatory requirements that restrict how companies communicate with their financial audiences is lessening, partly due to the aftermath of scandals like Enron and Worldcom.

The FT mentions a study by McKinsey last week which concluded that it was a myth that regular earnings guidance led to lower volatility and higher share valuations – two reasons traditionally cited in favour of such disclosure, the FT said.

One connection between these two stories is the likelihood of pressure for change in the UK regulatory environment regarding communication on financial matters by listed companies if an American exchange succeeds in acquiring the London Stock Exchange.

That could help loosen up the restrictive and controlled way in which listed UK companies communicate with their financial audiences. A good thing, in other words.

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Neville Hobson is the author of the popular blog which focuses on business communication and technology.

Neville is currentlly the VP of New Marketing at Crayon. Visit Neville Hobson’s blog: