Trump Wants to Scrap Quarterly Reporting. What Would Fewer Earnings Reports Mean for Investors?

Core Viewpoint - The ongoing debate about the necessity of quarterly earnings reports highlights the tension between short-term performance pressures and long-term strategic planning for companies, with potential implications for market volatility and investor transparency [4][5][16]. Group 1: Quarterly Reporting System - Large public companies incur significant costs, potentially in the millions, for preparing quarterly reports and audits, which may deter promising small companies from going public [1] - The current quarterly reporting schedule is linked to market volatility, as rapid earnings beats or misses can lead to erratic stock price movements, obscuring true business fundamentals [2] - Since 1970, U.S. publicly traded companies have been mandated to report earnings quarterly, a practice that some argue undermines long-term strategic focus [5][6] Group 2: Potential Changes to Reporting - If quarterly reporting were abolished, the SEC might shift to a semiannual reporting model, similar to practices in the U.K. and Europe [7] - Companies would still need to disclose essential financial information, but the frequency of these disclosures would decrease, potentially leading to less transparency for investors [8][11] - Businesses might voluntarily provide quarterly updates without earnings, focusing on metrics like revenue or subscriber counts, but these would not be regulatory requirements [9][10] Group 3: Impact on Investors - The removal of quarterly earnings reports would likely result in decreased transparency, making it harder for investors to identify early warning signs of financial issues [11] - This change could lead to greater uncertainty and more pronounced price swings when earnings are eventually reported, contradicting the notion that it would reduce market volatility [12][16] - Retail investors, who rely on regular updates for decision-making, could face inflated valuations and increased risks, while institutional investors may adapt more easily due to their analytical resources [13][14]