Every quarter, public companies across the nation disclose their earnings, providing investors with vital updates about their financial performance.
Executives have expressed strong opposition to this practice, arguing that the process is time-consuming and costly. They contend that frequent earnings reports divert attention from long-term strategic planning and instead push companies to focus on short-term gains.
In a recent social media post, President Donald Trump voiced his support for less frequent earnings disclosures. He suggested that companies should shift from quarterly to biannual reporting, asserting that this change would be beneficial for the country.
“This will save money, and allow managers to focus on properly running their companies,” Trump stated in his post.
Trump also emphasized a contrasting view of corporate management, claiming that other countries, such as China, pursue longer-term strategies: “Did you ever hear the statement that, ‘China has a 50 to 100 year view on management of a company, whereas we run our companies on a quarterly basis???’ Not good!!!”
However, the proposal has alarmed investor advocates and finance experts. They raise concerns that reducing the frequency of earnings disclosures could decrease transparency, allowing companies to potentially withhold crucial information for extended periods.
Professor Salman Arif from the University of Minnesota’s Carlson School of Management pointed out that moving to semiannual reports might foster conditions ripe for illegal activities, such as accounting fraud and insider trading, due to diminished scrutiny of a company’s financial practices.
“If we want to reduce accounting fraud, reduce opportunities for insider trading, improve the strength of our capital markets, and allow companies to invest for the long run, I think more transparency is truly beneficial,” he stated.
Currently, the Securities and Exchange Commission (SEC) requires that public companies report their earnings on a quarterly basis, a mandate in place since 1970.
Larger companies frequently hold investor calls, where executives answer questions from analysts and provide future guidance. These calls can significantly impact stock prices; major fluctuations occur when results either meet or disappoint investor expectations.
Executives have long lamented the pressure that quarterly evaluations impose on their decision-making processes. The Business Roundtable, which includes over 200 of the largest U.S. corporations, has lobbied for less frequent earnings disclosures. They argue that this fixation on short-term performance undermines the pursuit of long-term growth and sustainability.
Critics, however, caution that regular updates play a critical role in holding companies accountable. Arif believes that extending the time between disclosures could introduce unnecessary volatility into the market, as investors would be making decisions with incomplete information and could be caught off guard by unexpected news.
“Disclosure is a type of truth-telling,” Arif said. “You’re trying to reveal what’s happening behind the scenes. And so if you don’t have to do that very often, there’s just more chances that the few numbers that you do report could be manipulated more easily.”
While President Trump’s call for biannual earnings reporting has sparked considerable discussion, any move to change the current system would take significant time and effort.
During his previous term, Trump similarly expressed the desire to reduce the frequency of disclosures, yet the SEC never acted on the proposal.
On Monday, the SEC did not respond to a request for comment regarding this issue. Any potential change to the long-standing practice of quarterly earnings reports would require extensive deliberation and consultation, and it appears that such reforms are not imminent.
image source from：npr
