Japan Earnings Leaks Drain Investor Confidence: Street Whispers

When Nomura formally announced earnings later in the week, the company reported a fourth quarter profit of 22.1 billion yen, roughly a 23% higher than the Bloomberg report containing leaked figures.

Earnings leaks from anonymous sources are a step beyond the M&A and management leaks that cross trading screens daily. Breaking merger or corporate news, sourced anonymously, often partially reflects eventual facts because they are subject to quick change. With earnings, there is no need for such uncertainty.

Bloomberg has been able to get an early hold on the earnings of companies as large as Disney(DIS) in recent years by guessing a predictable URL for a release; however, corporations have now mostly plugged that hole.

In the case of Japan, the issue of actual leaks may be a symptom of a bigger worry for equity investors, even if economic woes cut sharply at markets in the past 20 years. Nomura, the largest brokerage in Japan, admitted on Tuesday to instances where it's employees leaked confidential initial public offering plans to investors and offered a revamp of its controls in an effort to stave off a stiff regulatory penalties.

"Nomura sincerely apologizes to our customers and all parties concerned for the trouble we have caused," said Nomura in a statement, which also noted that the bank would enhance its internal controls "to regain the trust of the public." In late July, Nomura replaced longtime chief executive Kenichi Watanabe with Koji Nagai, as the three-month probe into IPO leaks and insider trading hit a boiling point.

The recent black eye to Nomura, and it and Panasonic's recent earnings leaks add to an already suffering reputation for Japanese corporations, financial transparency and management.

In 2011, Michael Woodford, the first non-Japanese chief executive Olympus - and one of a handful of foreign CEO's in Japan -- uncovered a web of accounting fraud and bribery at the camera maker. Woodford was quickly fired by Olympus for initiating an internal inquiry and took to the global business press, notably the Financial Times, to detail the fraud and bribery charges.

This year Japanese authorities arrested seven former Olympus executives, including the company's former chairman after investigating Woodford's fraud allegations. Olympus shares have fallen nearly 50% in the last 12 months, even after tripling from lows when it faced the prospect of being delisted.