Eliza Wong
Disrupting Decades of Financial Reporting Norms
Former U.S. President Donald Trump has reignited a crucial debate about financial market transparency by proposing to eliminate mandatory quarterly earnings reports for public companies. His Monday Truth Social post advocating for semi-annual reporting instead challenges a system that has governed U.S. markets for over fifty years. This proposal arrives as Chinese investors closely monitor Western regulatory developments that could influence global reporting standards and cross-border investment flows.
The quarterly earnings reporting system represents more than just regulatory compliance—it serves as the heartbeat of market transparency and investor confidence worldwide. For international portfolio managers allocating capital to Chinese equities, any potential changes to U.S. reporting standards could signal broader shifts in global financial disclosure practices that might eventually affect Asian markets.
Alignment with Long-Term Stock Exchange Initiative
Regulatory Momentum Builds
The Long-Term Stock Exchange (LTSE) has been quietly advancing similar reforms, preparing to formally petition the U.S. Securities and Exchange Commission (SEC) to make quarterly reporting optional. According to Wall Street Journal reports, LTSE representatives emerged encouraged from recent meetings with SEC officials, suggesting regulatory openness to simplifying disclosure requirements.
This potential shift away from mandatory quarterly earnings reporting reflects growing concern about corporate America’s short-term orientation. Supporters argue that reducing reporting frequency would allow management teams to focus on long-term strategy rather than quarterly targets—a consideration particularly relevant for Chinese companies weighing U.S. listing options.
Global Regulatory Context
Many international markets already employ semi-annual reporting systems, including several European exchanges. The U.S. quarterly earnings reporting system remains an outlier among major economies, creating additional compliance burdens for foreign companies listed on American exchanges. Chinese firms considering U.S. IPOs watch these developments closely, as reduced reporting requirements could make American listings more attractive compared to Hong Kong or domestic Chinese exchanges.
Investor Resistance and Transparency Concerns
The Information Accessibility Debate
Many institutional investors vigorously oppose reducing earnings frequency, arguing that the current quarterly earnings reporting system provides essential data for investment decisions. Regular earnings calls and financial statements allow investors to monitor company performance, assess management execution, and make timely allocation decisions.
– One individual investor summarized the prevailing concern: “Information timeliness is critical for portfolio decisions”
– Pension funds and active managers rely on quarterly data for risk management and performance attribution
– Reduced frequency could disadvantage retail investors relative to institutional players with better access to management
Market Efficiency Implications
Financial economists widely credit regular disclosure requirements with improving market efficiency and reducing information asymmetry. The quarterly earnings reporting system forces companies to regularly confront their performance metrics and communicate challenges promptly. Moving to semi-annual reporting could increase volatility around earnings periods as more information gets released simultaneously.
For Chinese investors analyzing U.S. equities, any reduction in reporting frequency would complicate cross-border analysis and comparison with domestic companies that report quarterly on Shanghai and Shenzhen exchanges.
Addressing America’s Public Company Decline
The Listing Drought Phenomenon
Proponents of reform highlight America’s shrinking public markets as evidence that current disclosure requirements have become overly burdensome. The number of U.S. publicly traded companies has plummeted 17% over three years to approximately 3,700 as of June— nearly half the peak reached in 1997. Many companies now choose to remain private or pursue acquisitions rather than face public market scrutiny.
– Administrative burdens, including quarterly reporting, frequently cited as deterrents to public listings
– The U.S. has approximately half the public companies per capita compared to 1990s levels
– Technology companies particularly favor staying private longer to avoid quarterly performance pressure
Historical Reform Efforts
This isn’t the first attempt to reform the quarterly earnings reporting system. During his first administration, Trump directed regulators to study possible changes in 2018, though no formal policy changes resulted. That same year, JPMorgan Chase CEO Jamie Dimon and Berkshire Hathaway’s Warren Buffett published a joint essay supporting reduced earnings guidance to combat short-termism.
The current revival of this debate suggests that regulatory momentum may be building more substantially than during previous attempts to modify the quarterly earnings reporting system.
Global Implications for Chinese Market Participants
Cross-Border Investment Considerations
Chinese institutional investors maintaining significant U.S. equity exposure must consider how reduced reporting frequency might affect their analytical processes. Less frequent financial disclosures would require developing alternative methods for monitoring portfolio companies between reporting periods.
– Increased dependence on channel checks, supplier information, and alternative data sources
– Potential advantage for investors with superior corporate access and management relationships
– Possible widening of information gaps between U.S. and Chinese reporting standards
Potential Spillover Effects
While immediate changes would affect U.S. markets, successful implementation could inspire similar reforms elsewhere. Chinese regulators at the 中国证券监督管理委员会 (China Securities Regulatory Commission, CSRC) monitor international regulatory developments closely. However, given China’s continued emphasis on market transparency and investor protection, immediate changes to domestic reporting requirements appear unlikely.
The quarterly earnings reporting system has become deeply embedded in global investment practices, making significant changes potentially disruptive to international capital flows and comparative analysis.
Strategic Implications for Market Participants
The debate over quarterly reporting frequency represents more than just a technical regulatory discussion—it touches on fundamental questions about market structure, corporate governance, and investment time horizons. For Chinese investors with global portfolios, understanding these potential changes is essential for strategic positioning.
While Trump’s proposal faces significant political and practical hurdles, its resurgence indicates growing dissatisfaction with current market structures. Portfolio managers should monitor developments while stress-testing their analytical frameworks against potential reduced disclosure scenarios.
Engage with regulatory comment processes through industry associations and consider how alternative data sources might compensate for reduced formal disclosure. The evolution of the quarterly earnings reporting system deserves attention from all global market participants, as changes could reshape international investment practices for decades to come.
