A proposal by the U.S. Securities and Exchange Commission (SEC) to allow public companies to shift from quarterly to semi-annual reporting is neutral from a credit ratings perspective, says Fitch Ratings.
In a report published Thursday, the rating agency said the SEC’s proposal to enable semi-annual reporting will have a “limited impact” on public companies’ credit ratings.
“Frequent regulatory reporting can enhance governance … but a move to semi-annual reporting in isolation will not materially impact our governance assessment,” Fitch said.
Among other things, the rating agency noted that semi-annual reporting is already “widely accepted across developed markets, including Europe, the U.K., and Australia, with minimal impact on Fitch’s ratings.”
For instance, in the Europe, Middle East and Africa region, which already uses semi-annual reporting, only 2% of rated issuers have their ratings impacted negatively by governance issues. Fitch said the primary driver of the rating impact in those cases is the “ownership concentration [at those companies] rather than financial disclosure concerns.”
That said, Fitch also noted that less frequent public disclosure by companies “increases information asymmetry for the broader investment community. The market may penalize reduced visibility into financial performance through wider credit spreads or a higher cost of capital.”
The SEC’s proposal was out for comment until July 6. If approved, it’s likely that the option of semi-annual reporting wouldn’t be available until 2027.
Earlier this year, the Canadian Securities Administrators began allowing certain venture issuers to move to semi-annual reporting too.