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Recently, the Shanghai Stock Exchange (SSE) launched the special evaluation on the disclosure quality of “Management’s Discussion and Analysis” in the SSE-listed companies’ annual reports of 2012, by inviting institutional investors to conduct special evaluation on the disclosure quality of “Management’s Discussion and Analysis” in listed companies’ annual reports.
It is learnt that, as a key disclosure aspect of a listed company’s annual report, “Management’s Discussion and Analysis”, based on analysis of the literal information of the company’s relevant financial statistics, is supposed to reveal the company management’s evaluation and analysis on the company’s business circumstances in the past, as well as make predictive judgment on the company’s development in the future; therefore, it is a necessary and useful complement for the company’s financial report, and can help strengthen the pertinence and effectiveness of information disclosure. The purpose of the special evaluation activity conducted by the SSE is to further enhance the disclosure quality of “Management’s Discussion and Analysis” in listed companies’ annual reports, establish market models, and advocate the best practices.
The SSE has always attached great importance to the information disclosure of “Management’s Discussion and Analysis”, in a bid to constantly improve the disclosure quality of SSE-listed companies by various means. As early as in 2005, through cooperation with relevant institutions, the SSE launched the subject research on disclosure of “Management’s Discussion and Analysis” in listed companies’ regular reports, on the basis of which, the SSE formulated the “No. 3 Memorandum on Annual Reports – Requirements for Compiling Management’s Discussion and Analysis”. In 2011, the SSE held the Corporate Governance Forum themed with the narrative information disclosure, and later made amendments to the aforesaid memorandum in consideration of the latest regulatory practices, providing useful references for the China Securities Regulatory Commission in terms of amending the annual report rules.
It is also learnt that, the activity of special evaluation on “Management’s Discussion and Analysis” this time will be divided into two phases: in the first phase, according to the relevant standards in terms of the completeness, relevance, and policy-making pertinence, the research departments of institutional investors including the securities companies and fund management companies will analyze and evaluate the disclosure quality of “Management’s Discussion and Analysis” in the SSE-listed companies’ annual reports of 2012, based on which, they will vote to generate ten companies with best performances in disclosure quality; in the second phase, the SSE will rank the ten listed companies according to the vote result of the institutional investors, award the title of “Enterprise with Best Disclosure of ‘Management’s Discussion and Analysis’ in Annual Reports of 2012” to the ten listed companies winning most votes, and publish the name list.
The SSE said that, this special evaluation activity is a significant attempt to propel the institutional investors to participate in corporate governance and enhance the efficiency of information disclosure on the part of the listed companies. The institutional investors’ evaluation result in this activity will offer references for further assessment on listed companies’ secretaries to directorates and the appraisal of special award for corporate governance.
