Should we ditch quarterly earnings reports?

Key Takeaways

U.S. public companies currently issue quarterly earnings reports, a system established in 1970.
The Trump administration has proposed shifting from quarterly to semi-annual financial reporting.
Less frequent reporting may encourage long-term company investments but could increase stock price volatility.
Rahul Washishta's research indicates increased reporting frequency correlates with decreased capital investment.
The Securities and Exchange Commission (SEC) is actively reconsidering the mandate for quarterly reports.

U.S. public companies are currently required to report earnings every three months via conference calls, a practice adopted in 1970.
These quarterly reports are a crucial mechanism for the stock market, informing investor decisions and capital allocation that impacts retirement funds.
President Trump proposed changing to semi-annual earnings reports, citing potential long-term benefits for companies and investors.
Research indicates that less frequent reporting can lead to increased stock price volatility, as noted by Julie Bell Lindsay, CEO of the Center for Audit Quality.

The SEC, established in the 1930s, initially required annual earnings reports, increasing to semi-annual in the 1950s and quarterly in 1970.
Rahul Washishta, a professor at Duke University's business school, emphasizes that earnings reports are vital for channeling capital efficiently within the economy.
Financial filings have become more detailed; annual reports that were once around 15 pages now extend to double that length for quarterly reports.
Arguments for reducing reporting frequency cite paperwork costs and the potential for 'managerial myopia,' where short-term focus deters long-term investments.

Research by Rahul Washishta and colleagues indicates that increasing reporting frequency from annual to quarterly led to a 1.5% decrease in annual capital investment.
The push for longer-term thinking in financial reporting has led to unusual alliances, with some sustainability-focused investors supporting less frequent reports.
Arguments for retaining quarterly reports include increased information availability for all investors, from large pension funds to individual traders on platforms like Robinhood.
Proponents of quarterly reports contend they lead to more informed decisions, higher trading volume, and more accurate market pricing.

The Securities and Exchange Commission (SEC) is reconsidering the elimination of mandatory quarterly reports.
This process began under the first Trump administration and has been restarted by the current SEC leadership.
SEC Chairman Paul Atkins indicated that a formal proposal for changes could be ready by early 2026.