Growing Pressure for Reporting Reform
Major business leaders and financial experts are reportedly pushing for a fundamental shift in how public companies disclose their financial performance, according to industry analysis. The movement seeks to replace mandatory quarterly reporting with a semiannual system that proponents argue would better align with long-term value creation.
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Sources indicate that former President Donald Trump recently called for the U.S. Securities and Exchange Commission to reconsider its quarterly reporting policy. This development came shortly after the Long-Term Stock Exchange announced it would petition the SEC for similar changes, marking what analysts suggest is growing institutional momentum for reform.
Research Reveals Short-Term Focus
Multiple studies reportedly demonstrate how quarterly reporting requirements influence corporate behavior. A 2023 study of Japanese firms found that mandatory quarterly reporting led managers to cut research and development spending while adjusting operations to meet near-term targets.
Similar findings emerged from research published in The Accounting Review, which examined European companies forced into quarterly disclosure. The report states these firms engaged in short-term manipulation that produced brief performance improvements followed by declines.
Historical Context and Modern Reality
When the current quarterly reporting requirement was established in 1970, the financial landscape was dramatically different. According to reports, investors were predominantly retail participants with limited access to corporate data. Today’s market is more professionalized and specialized, with extensive information readily available through digital channels.
The evolution of market structures and the growing importance of private companies in the economy have changed the disclosure landscape. Analysts suggest that given the success of private companies operating without quarterly reporting requirements, reducing public company reporting frequency might not negatively impact capital allocation.
Industry Leadership Calls for Change
The push against quarterly reporting has attracted influential supporters across the financial sector. Nicolai Tangen, head of Norway’s $1.7 trillion Government Pension Fund, reportedly called for ending quarterly reporting, describing it as “potentially damaging to market dynamism.”
This sentiment echoes a 2018 joint op-ed from Warren Buffett and Jamie Dimon that criticized the quarterly “earnings game” and its effect on business decision-making. Despite concerns about transparency, proponents argue that modern disclosure frameworks can maintain investor confidence while reducing reporting frequency.
International Precedents and Alternatives
The United Kingdom and European Union already permit less frequent reporting, complemented by requirements for immediate disclosure of significant developments. According to the analysis, this approach maintains market transparency while allowing companies to focus beyond 90-day cycles.
Experts suggest the SEC could consider various alternative frameworks, including cumulative reporting or simplified key performance indicator disclosures instead of full financial statements. These approaches to market trends might better serve long-term investors while maintaining necessary transparency.
Quarterly Guidance Declines
While quarterly reporting remains mandatory, the practice of providing quarterly earnings-per-share guidance has significantly declined. According to data from industry publications, the percentage of S&P 500 companies issuing quarterly EPS guidance dropped from 50% in 2004 to just 21% in 2024.
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This trend suggests that companies are already voluntarily moving away from the short-term focus that critics argue undermines long-term planning. The shift reflects broader industry developments toward sustainable business practices.
Path Forward for Regulatory Reform
The SEC faces increasing pressure to modernize reporting requirements for what analysts describe as a fundamentally different financial ecosystem than existed five decades ago. While not proposing elimination of quarterly reports entirely, reformers advocate making them optional while maintaining robust transparency through other mechanisms.
According to experts, such a change would better serve the ultimate beneficiaries of capital markets – savers investing for decades rather than quarters. As related innovations in market structure continue to evolve, regulatory frameworks may need similar adaptation to remain effective in promoting sustainable economic growth.
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