Last month, I blogged on the question of whether quarterly earnings forecasts were about transparency or whether they were just a fool's game that just encouraged appalling short-term-ism.

Another problem with earnings guidance is that they are based on the assumption of stable trading environments. Those days are long gone.

Now, a University of Washington study suggests that companies might have another agenda in dropping earnings forecasts: their shares were doing badly in the 12 months before they made the decision. The implication is that they stopped giving guidance because they didn't want to to tell Wall Street how badly they were doing.

But the question is whether you need quarterly earnings guidance for real transparency. As the head of global securities research and economics at Merrill Lynch,Candace Browning writes in the Financial Times, quarterly guidance should be scrapped. But, she says, that doesn't stop a company from providing investors with really important information, the stuff that counts. Like for example, those plans for reducing costs, increasing market share, growing capacity and boosting returns.

Earnings guidance is not the be-all and end-all of a company's well-being. It's just a rough guide and one indicator of how it might be travelling.

Or as Browning puts it:

''The company's goal is to encourage the market's acceptance of its self-defined measurement stick and then beat the resulting consensus, thus proving that it is earning higher-than-expected returns and so worthy of further allocation of investor capital.
"This process creates an echo chamber that drowns out investor debate and distils what should be a complex message about a company's operations and performance into a single number - dictated by the company itself.
"Earnings guidance dictates an outcome and discourages debate. Worst of all, this one number cannot possibly convey the subtle forces that shape a wise capital allocation decision and ultimately investors are let down."

The problem with earnings guidance is that a lot of the time, it isn't guidance at all. It isn't about transparency and the guidance is definitely not authentic. As Browning says, companies can tweak what they like to call guidance in all sorts of ways by massaging the numbers. So instead of transparency, it's a game.

Browning says:
"By providing specific earnings guidance, a company dictates both the measurement stick and the expected outcome," says Browning.
"The measurement stick is typically a certain level of earnings - which may or may not be appropriate. And guidance is typically given without regard to important non-operating items such as write-offs or restructuring charges, which should be included because they reflect management's prior decisions regarding allocation of capital. The company's goal is to encourage the market's acceptance of its self-defined measurement stick and then beat the resulting consensus, thus proving that it is earning higher-than-expected returns and so worthy of further allocation of investor capital.
This process creates an echo chamber that drowns out investor debate and distils what should be a complex message about a company's operations and performance into a single number - dictated by the company itself."