Eliza Wong
Executive Summary
- Former President Donald Trump has publicly called for ending mandatory quarterly earnings reports, proposing semi-annual disclosures instead to reduce corporate burdens
- The initiative aligns with Long-Term Stock Exchange (LTSE) efforts and signals potential regulatory shifts under a possible SEC leadership change
- Investors express concerns about reduced transparency and increased market volatility if reporting frequency decreases
- Global precedents exist in Europe and UK where quarterly reports are optional but many companies maintain them voluntarily
- Implementation timeline suggests any changes would likely occur post-2026 following standard SEC review processes
Market Shakeup as Trump Revives Quarterly Reporting Debate
Financial markets are buzzing after former President Donald Trump’s unexpected intervention in corporate reporting standards. Through his Truth Social platform, Trump declared that American companies should abandon quarterly earnings reports in favor of semi-annual disclosures, reigniting a debate that began during his first administration. This proposal comes at a critical juncture for US capital markets as regulators balance transparency requirements with corporate cost concerns.
The potential shift from quarterly earnings reports to semi-annual disclosure represents one of the most significant potential changes to financial reporting in decades. Market participants globally are weighing implications for investment decisions, particularly those with exposure to Chinese equities who monitor US regulatory developments as potential precursors to changes in other markets. The timing coincides with ongoing discussions about reducing administrative burdens for public companies.
Historical Context and Regulatory Framework
Five Decades of Quarterly Reporting Standards
The Securities and Exchange Commission (SEC) first mandated quarterly financial reporting over fifty years ago as part of broader investor protection measures. The Form 10-Q requirement emerged from market reforms designed to ensure regular information flow to investors between annual reports. This system has created predictable rhythms in financial markets, with earnings seasons occurring quarterly and significantly influencing trading activity and investment decisions.
Quarterly earnings reports have become embedded in market infrastructure, supporting everything from analyst coverage to executive compensation structures. The potential elimination of this system would represent a fundamental shift in how investors access corporate information. Many market participants have built entire investment methodologies around quarterly data patterns, making this potential change particularly disruptive.
Current Regulatory Environment and SEC Position
The current SEC leadership has signaled openness to regulatory streamlining, creating potential receptivity to proposals reducing reporting frequency. Chairman Gary Gensler’s approach to disclosure requirements has emphasized materiality rather than volume, potentially creating space for reconsidering reporting frequency. However, the Commission must balance efficiency concerns with its core mission of protecting investors and maintaining fair markets.
The Long-Term Stock Exchange (LTSE) has formally petitioned the SEC to make quarterly reporting optional, creating a regulatory pathway for Trump’s proposal. LTSE representatives have met with SEC officials and expressed optimism about potential changes. This institutional support provides credibility to what might otherwise be dismissed as political posturing, elevating the proposal to serious policy consideration.
Global Precedents and Comparative Analysis
European Experience with Reduced Reporting Frequency
European markets eliminated mandatory quarterly reporting in 2013, providing nearly a decade of experience with voluntary disclosure regimes. Interestingly, most companies continue to publish quarterly updates despite the reduced requirement, responding to investor expectations and market practices. The European experience suggests that even with regulatory permission to report less frequently, market forces maintain substantial reporting continuity.
In the United Kingdom, regulators removed quarterly reporting requirements approximately ten years ago, with similar results. Many FTSE companies continue quarterly disclosures, particularly those with significant international investor bases. This pattern suggests that investor expectations rather than regulatory requirements primarily drive reporting frequency in developed markets.
Implications for Chinese Equity Markets and Cross-Listed Companies
For sophisticated investors in Chinese equities, particularly those monitoring US-listed Chinese companies, changes to American reporting standards could have significant secondary effects. Many Chinese companies listed on US exchanges already navigate complex reporting requirements across jurisdictions. Reduced US reporting frequency might create pressure for similar changes in other markets, including potentially affecting reporting expectations for companies listed on Hong Kong Exchanges and Clearing Limited (香港交易及結算所有限公司) or Shanghai Stock Exchange (上海证券交易所).
The debate about quarterly earnings reports intersects with broader discussions about short-termism versus long-term planning that resonate particularly in Chinese market contexts. Many Chinese companies emphasize long-term strategic development, potentially making reduced reporting frequency more compatible with existing corporate philosophies. However, international investors accustomed to quarterly updates might view such changes cautiously.
Investor Perspectives and Market Implications
Transparency Concerns and Market Quality Considerations
Many institutional investors strongly oppose reducing financial reporting frequency, arguing that quarterly earnings reports provide essential transparency for investment decisions. Portfolio managers like Burns McKinney of NFJ Investment Group acknowledge potential benefits for corporate planning but emphasize the importance of regular information flow for price discovery and risk assessment. The investment community remains divided between those prioritizing long-term corporate development and those requiring frequent data for active management strategies.
Reduced reporting frequency could increase information asymmetry between corporate insiders and public investors, potentially raising equity risk premiums and increasing volatility around reporting periods. Some analysts suggest that less frequent reporting might actually increase price swings when information finally emerges, as more material developments accumulate between reporting dates. This could particularly affect sectors with rapid change or high uncertainty.
Corporate Governance and Executive Decision-Making
Proponents argue that moving from quarterly earnings reports to semi-annual disclosures would reduce managerial short-termism and encourage longer-term strategic thinking. This perspective gained prominent supporters in 2018 when JPMorgan Chase CEO Jamie Dimon and Berkshire Hathaway’s Warren Buffett published a joint commentary criticizing excessive focus on quarterly earnings forecasts. While not opposing quarterly reporting itself, they highlighted how quarterly pressure can distort investment and hiring decisions.
Corporate leaders face constant pressure to meet or exceed quarterly expectations, sometimes at the expense of long-term value creation. The potential shift to semi-annual reporting could alleviate this pressure, allowing executives to make decisions based on multi-year trajectories rather than next quarter’s results. However, critics counter that disciplined quarterly reporting creates valuable accountability and that longer reporting intervals might enable poor performance to continue undetected for extended periods.
Implementation Timeline and Practical Considerations
Regulatory Process and Potential Timeline
Even if the SEC moves forward with considering reduced reporting frequency, the regulatory process ensures deliberate consideration. The Commission would likely publish any formal proposal for public comment, soliciting input from investors, companies, academics, and other stakeholders. This process typically takes months, and subsequent analysis and potential modifications add additional time.
Industry observers suggest that even under accelerated consideration, any changes to quarterly earnings report requirements would likely not take effect before 2026. The implementation would probably include transition periods to allow companies and investors to adjust to new reporting rhythms. Market infrastructure providers would need to modify systems and processes built around quarterly reporting cycles.
Corporate Response and Adaptation Strategies
If quarterly earnings reports become optional rather than mandatory, companies would face strategic decisions about maintaining current practices or reducing disclosure frequency. Factors influencing these decisions would include investor expectations, analyst coverage, peer practices, and industry norms. Companies might differentiate themselves through commitment to transparency or through emphasizing long-term orientation.
Many corporations might adopt hybrid approaches, maintaining quarterly updates but potentially reducing the scope or changing the format of interim disclosures. Some might emphasize non-financial metrics or strategic updates between formal reporting periods. The evolution would likely vary significantly across sectors, with technology companies potentially adopting different approaches than traditional industrial firms.
Strategic Implications for Market Participants
The debate over quarterly earnings reports reflects broader tensions in modern capital markets between short-term performance pressure and long-term value creation. For investors in Chinese equities and global markets, these developments warrant close attention as potential indicators of evolving market practices. The outcome could influence corporate behavior, investment strategies, and ultimately market efficiency across multiple jurisdictions.
Sophisticated market participants should monitor SEC developments while assessing how reduced reporting frequency might affect their investment processes. Portfolio managers may need to develop alternative methods for monitoring company performance between reporting dates. Analyst communities might shift emphasis toward different types of information and indicators if quarterly financial statements become less available.
Forward-looking investors should consider engaging with companies about their reporting intentions under potential new frameworks. The coming months will likely see increased discussion about optimal information flow in markets, with implications beyond US borders. As global markets increasingly interconnect, changes to American reporting standards could eventually influence practices elsewhere, including potentially in Asian markets.
Stay informed about regulatory developments by monitoring SEC announcements and industry commentary. Consider how reduced reporting frequency might affect your investment thesis for specific companies and sectors. Engage with corporate management teams about their reporting plans and perspectives on optimal disclosure practices. The evolution of financial reporting standards represents both challenge and opportunity for sophisticated market participants.
