Core Viewpoint - The call for the SEC to reconsider quarterly corporate reporting reflects a growing concern that such practices encourage short-term behavior at the expense of long-term value creation [3][4][5]. Group 1: Current Reporting Practices - Public companies typically engage in quarterly reporting, which may lead to a focus on short-term results rather than sustainable growth [2][4]. - The Long-Term Stock Exchange has proposed a shift to semiannual reporting, aiming to enhance long-term value creation [3][4]. - Historical context shows that the current quarterly reporting requirement was established in 1970, a time when the investment landscape was significantly different [5]. Group 2: Impact on Corporate Behavior - Research indicates that mandatory quarterly reporting negatively affects corporate managerial behavior, leading to reduced investment in R&D and operational adjustments to meet short-term targets [6]. - A study of Japanese firms revealed that quarterly reporting resulted in short-term manipulation, with initial performance boosts followed by declines [6]. Group 3: Changes in EPS Guidance - The practice of issuing quarterly earnings-per-share (EPS) guidance has decreased from 50% of S&P 500 companies in 2004 to 21% in 2024, highlighting a shift away from short-term performance metrics [8]. - Despite the decline in EPS guidance, many companies remain trapped in a quarterly reporting cycle, which is likened to a "hamster wheel" [8]. Group 4: Potential Solutions - Extending reporting periods could help companies escape the 90-day cycle, although it is not a complete solution [9]. - The SEC is encouraged to explore alternative reporting frameworks that prioritize long-term value creation while maintaining transparency and accountability [11]. - Options such as cumulative reporting or simplified reporting of key performance indicators (KPIs) could be considered [11]. Group 5: Long-term Focus - A shift to optional quarterly reporting could realign capital markets to better serve long-term investors, such as savers planning for decades ahead [12].
It’s Time To Break The Quarterly Cycle