Triggered Disclosures: A Way out of the Disclosure Dilemma!

Over the last few decades, disclosures have become bulkier, while becoming less informative. In this session, I look at reasons for this development, starting with a one-size-fits-all disclosure philosophy, extending into the definition of materiality (backward looking and earning focused). Using initial public offerings as illustration, I argue for triggered disclosures, where a company's business model and valuation story trigger related disclosures. A company that builds it valuation story around an immense Total Addressable Market (TAM) has the obligation to not only provide the basis for its estimate, but also expected market shares and continued reporting on how this market evolves over time, in subsequent disclosures. A subscription-based company should be required to report on churn rates, details of customer acquisition costs and cohort tables, describing how subscriber behavior changes, with subscriber aging. Triggered disclosures will allow us to have our cake and have it too, slimming disclosures, while making them informative.

[justinjose]

Thanks for the insightful and thought provoking videos Prof. Damodaran. Keep them coming!

[pankajchoudhary]

Thank you Professor. The session is very helpfu!!

[varunjain]

Practical lectures on corporate governance are great !!!

[Scott-kcfg]

I totally agree. Great video. I like the triggered disclosure clause.

[Septumsempra]

What value do we place on secrets. To what extent is management allowed to not disclose in the interest of shareholders?

s/o from South Africa

[diveeda]

26:22 "any of the bitches" what an ending

[DeLanoLLoya]

Confused on how disclosures with respect to future earnings would be reliable to stakeholders. Please explain. Materiality is anything with significance that would impact investors and stakeholders decisions based on the financial statements. Not just earnings. Also other relevant factors… but they have already occurred. Because that is how investors use accounting information. To model the future. You can’t report materiality on future earnings… it isn’t reliable enough. Auditors will consider it for evaluating the companies ability to continue as a going concern but reliance on this measure for materiality has limited usefulness for stakeholders as maybe the future earnings estimate is actually incorrect?

[michaelseldon]

thank you prof. but I’m afraid investors will be left to judge for themselves and read through 400 pages of prospectus. ha-ha

[JaiiDesaii]

Please make a valuation video for Nykaa which is to IPO in next week, sir.

Thanking you in anticipation.

Appreciate your efforts on Paytm.

[allyxinlin]

Would it be helpful to simply set a length restriction for annual report, like 100 pages?

[manzilrai]

reason why algos rule trading. They parse through keywords and make trades in real-time while us humans are still trying to open the webpage.

[MotivationInvest]

Great video, "the disclosure disease" is a pandemic 😂

[adama]

White text to fool the algos. Claim profit will 10x. Algos go crazy... We all laugh