The following is taken from an article in the National Post on February 3, 2003.

For decades it has been taken for granted on Wall Street that an open market depends on the free flow of information. The more information you get into peoples hands, the fairer and more reliable the market will be. Or so the argument goes. But in the wake of the worst bear market since the Great Depression, some highly influential market players are taking a dim view of all this radical openness. With the advent of the Internet, 24-hour stock TV and real-time discount stock trading, some believe the market is suffering from information overload. What the market needs is less disclosure, or at least less frequent disclosure, they say. One of the first traditions this group would like to see discarded is the requirement to report earnings quarterly.

The latest market guru to espouse the end of quarterly reporting is Henri-Paul Rousseau, chief executive of the Caisse de dpt et placement du Qubec. In a speech yesterday he said the markets fixation on short-term performance is impeding the ability of corporate executives to adequately do their jobs. We have to look at this possibility of moving from quarterly reporting to an annual one, he said. The big difference will not be about managing the expectations concerning this quarters EPS, not managing the press nor managing analysts. It will be about managing the company.

While some claim that fewer earnings reports would lead to less market volatility, in reality the

change would increase volatility enormously, said Chuck Hill, director of research for First Call /

Thomson Financial, a firm that tracks analysts earnings estimates.

Required: The article claims that quarterly reporting has a negative impact on the management of a company. Provide arguments supporting and opposing this claim.

(i) Reasons supporting the claim. (4 marks)

(ii) Reasons against the claim. (4 marks)