The U.S. debate over how frequently public companies must disclose financial results has been rekindled since the administration renewed a plan last year to permit reporting every six months rather than every three. The Securities and Exchange Commission is preparing to solicit public feedback on a proposal to eliminate the long-standing quarterly reporting requirement, a change the administration first floated in an earlier term.
Advocates of the shift maintain that less frequent mandatory reporting would let corporate leaders concentrate on longer-term strategy and cut the administrative costs associated with being publicly traded. They argue the move would free management teams from the cyclical pressure of quarterly metrics and reduce paperwork burdens.
Yet many in the investor community - from large hedge funds to asset managers - say companies that opt out of quarterly disclosure could pay a price in the marketplace. Sam Rines, a macro strategist at WisdomTree Asset Management, warned that established firms making the change would draw scrutiny from active managers and could face portfolio reductions or reevaluations of their valuations. Rines said market participants generally seek more, not less, information.
Some financial institutions that broadly favor the anticipated administration proposal nonetheless plan to keep providing quarterly updates to the market. JPMorgan Chase, while supportive of measures intended to strengthen capital markets, told investors it would continue to offer quarterly guidance through conference calls with analysts and investors. The bank did not immediately provide further comment.
Rines suggested corporate boards might be reluctant to approve a move away from quarterly reporting once directors weigh the modest cost savings against potential negative investor perception and higher perceived risk. That perspective was echoed at a recent SEC investor advisory committee meeting, where several large buy-side firms cautioned against eliminating the current cadence.
Participants at the advisory committee meeting included investment managers such as Citadel and Fidelity, both of which expressed concern that discontinuing quarterly reports could increase market volatility and raise the expense of raising or servicing investment capital for companies that adopt less frequent reporting. Those firms also stressed that regular quarterly disclosure plays a role in keeping market valuations aligned with company fundamentals. Citadel declined to elaborate further, while Fidelity did not respond to requests for comment.
Industry practitioners expect limited uptake of a semiannual option. Mike Reynolds, vice president of investment strategy at Glenmede, an asset and wealth management firm, said his expectation is that most companies will continue to report on a quarterly basis.
The SEC declined to comment on the exact timing of any proposal release, but an agency spokesman noted that Chairman Paul Atkins has expressed a desire to let the market determine the optimal reporting frequency based on factors such as industry, company size, and investor expectations.
The requirement for quarterly reporting has been in place since 1970. Portfolio managers and asset owners who discussed the pending rule change with market observers acknowledged that they hold foreign companies that report twice yearly and private firms that offer even less frequent performance updates.
Smaller public companies - and firms contemplating an initial public offering - are the ones most frequently cited as potential adopters of semiannual reporting. Market infrastructure participants argue that the burden of quarterly disclosure is felt more acutely by small and medium-sized issuers. Nasdaq, in a white paper published last year, made the case that reducing reporting frequency could alleviate some administrative strain on smaller companies.
Supporters from the investment community say less frequent reporting could shift investor attention away from short-term fluctuations toward multi-year value drivers, which may be particularly meaningful for small-cap growth investors. Jordan Stuart, an investment director at Federated Hermes, said businesses where research and innovation take time to materialize - for example in biotech - could benefit because quarterly disclosure can overemphasize short-term metrics such as cash burn or isolated trial outcomes.
One of the rationale offered for allowing less frequent reporting is its potential to help reverse the long-term decline in the number of U.S.-listed companies. The count of publicly traded firms in the United States peaked at about 8,800 in the late 1990s and has since fallen to roughly 4,200. Proponents suggest that compliance costs and paperwork have contributed to that reduction and that easing reporting obligations might encourage more companies to consider public markets.
Still, investors noted that even smaller issuers may retain quarterly reporting voluntarily to compensate for another trend: a reduction in analyst coverage of small-cap companies. With fewer analysts following many smaller stocks, regular quarterly updates can serve as an important source of information for the market.
Industry voices expressed mixed personal and professional views. Jack Ablin, chief investment strategist at Cresset Wealth, recalled the operational burden of preparing frequent public presentations when he worked for a publicly traded company, but from the portfolio management perspective he said the preference is clear: more disclosure is generally preferable.
Given the range of stakeholder views - from exchanges, banks and issuers that see potential benefits in reduced reporting complexity to buy-side investors concerned about transparency and valuation - market observers expect that any final outcome may leave the choice of reporting cadence with issuers but result in only a small minority of firms abandoning quarterly reports.
Summary: The SEC is expected to solicit comments on a proposal to allow semiannual instead of quarterly earnings reports. Proponents say reduced frequency could help management focus on long-term strategy and lower compliance costs, while many investors warn that adopting semiannual reporting could trigger investor backlash, hurt valuations and increase volatility. Market participants generally expect most companies to continue reporting quarterly.