President Donald Trump lately revived a proposal he first raised throughout his earlier time in workplace: eliminating the requirement for publicly traded US corporations to launch quarterly earnings experiences, as an alternative mandating semi-annual disclosures. The thought is framed as a technique to scale back compliance prices and permit corporations to concentrate on long-term technique somewhat than the following three months of outcomes. Whereas the notion has intuitive attraction, it additionally raises severe questions on transparency, market effectivity, and the stability of energy between company managers and buyers.
Quarterly reporting has lengthy been criticized for reinforcing what economists and company governance specialists name short-termism. Executives are sometimes compelled to handle earnings targets somewhat than allocate capital in ways in which maximize long-term worth. Analysis has proven that managers typically defer or cancel value-accretive initiatives — similar to investments in analysis and growth, plant enlargement, or workforce coaching — as a result of the prices depress quarterly earnings per share, even when the long-term advantages are clear. Furthermore, the cycle of “earnings season” can distort managerial incentives. Corporations challenge ahead steering, analysts construct consensus estimates, after which the market reacts sharply as to whether outcomes beat or miss expectations—typically by mere pennies per share. This fosters a tradition of earnings administration, the place discretionary accounting decisions or one-off price cuts are used to clean outcomes. For corporations, notably smaller ones with restricted assets, the compliance burden of quarterly filings provides prices in authorized, accounting, and investor relations features.
Critics argue that the US apply locations corporations at a aggressive drawback relative to corporations in Europe, the place semi-annual reporting is the norm. If managers are much less tethered to near-term EPS efficiency, they will function with an extended horizon, aligning company technique extra intently with innovation cycles, capital funding horizons, and structural shifts within the international economic system. Trump himself emphasised this when he contrasted America’s “quarterly mentality” with China’s capability to take a multi-decade view.
However whereas quarterly reporting is imperfect, lowering disclosure frequency to twice a yr additionally carries dangers. Essentially the most speedy concern is the knowledge hole that may emerge between formal disclosures. Markets perform greatest when info flows effectively; semi-annual reporting would go away buyers with fewer knowledge factors on which to evaluate efficiency and danger. For institutional buyers, this could complicate portfolio administration, whereas retail buyers may face heightened uncertainty. An extended hole between experiences might additionally encourage info asymmetry. Company insiders would proceed to have entry to detailed, present knowledge, whereas public shareholders must wait a number of extra months for official numbers. This creates higher potential for insider buying and selling and selective disclosure. Regulators may reply with stricter interim disclosure necessities — undermining the very price financial savings the proposal seeks.
One other trade-off lies within the impact on market self-discipline. Quarterly scrutiny gives a type of ongoing accountability, pressuring administration groups to right underperformance swiftly. With solely two reporting home windows annually, underperforming methods might persist unchecked for longer, leaving shareholders much less empowered to intervene or apply stress.
Lastly, the reporting cycle serves an necessary signaling perform. Frequent outcomes permit the market to include new info into valuations in a well timed means, making securities costs extra reflective of underlying fundamentals. Lengthening the reporting interval might improve volatility across the semi-annual dates and weaken the method of steady value discovery that’s central to fashionable monetary markets.
The selection, due to this fact, isn’t a easy one between pricey, short-termist quarterly reporting and environment friendly, long-termist semi-annual reporting. It’s as an alternative a trade-off between transparency and accountability on the one hand, and managerial flexibility and value financial savings on the opposite. Transferring to six-month reporting would relieve corporations of some compliance burdens and doubtlessly encourage longer-term pondering, however on the expense of environment friendly pricing and entry to info. It is usually price noting that lots of the most pernicious points of quarterly reporting stem not from the reporting itself, however from the ecosystem of earnings steering, analyst estimates, and media scrutiny that has grown up round it. Corporations will not be legally required to challenge quarterly steering; many accomplish that voluntarily. Some corporations have already chosen to cut back on ahead steering or to emphasise various efficiency metrics higher aligned with long-term worth creation.
Quite than imposing a one-size-fits-all mandate, regulators might think about a extra versatile method. Boards of administrators, executives, and shareholders may very well be empowered to determine the frequency and type of reporting most acceptable to the agency’s enterprise mannequin, shifting methods, and distinctive investor base. In such a system, one firm may proceed to challenge quarterly outcomes to sign self-discipline and transparency, whereas one other may go for semi-annual and even annual disclosures coupled with strong narrative reporting. Some corporations may even experiment with advert hoc, event-driven earnings releases, offering updates solely when materials developments warrant disclosure somewhat than on a hard and fast timetable. Buyers, in flip, might vote with their {dollars}, allocating capital towards the corporations whose disclosure practices greatest match their preferences for transparency and time horizon. This is able to successfully flip reporting cadence into a brand new dimension of company competitors.
In the long run, the query is much less about whether or not quarterly or semi-annual reporting is “higher” and extra about whether or not disclosure practices can themselves evolve right into a aggressive benefit in attracting and retaining shareholder capital.