Why Trump’s bid to end quarterly earnings is no sure bet

It might not be that simple.

Investors are likely to put up a fight. Institutional investors such as pension funds and hedge funds typically crave more information on the companies they follow, not less. In other countries where regulators removed quarterly reporting requirements, many companies still report more frequently.

A Securities and Exchange Commission spokeswoman said Monday the agency and its chairman, Paul Atkins, are now prioritizing the issue at Trump’s request, suggesting it has momentum. Such a change would support the Trump administration’s goal of reducing regulation.

It isn’t clear how the issue came into Trump’s focus; a similar proposal from the Long-Term Stock Exchange is expected to land at the SEC any day, The Wall Street Journal has reported. LTSE is a stock-trading venue for companies focused on long-term goals. Its proposal would apply to all public companies, not just the few on its exchange.

One possible outcome could be that Trump gets his win—cutting the red tape of quarterly reports—while little changes for most companies because they opt to continue reporting regularly.

“You’ll see some companies try to distinguish themselves from others by continuing to report quarterly and you’ll see other ones that just say, ‘Hey I’ll take the shade,’" said Jack Ciesielski, owner of the investment research firm R.G. Associates.

Despite Europe and the U.K. doing away with quarterly reporting requirements in 2013 and 2014, respectively, many companies there still choose to report four times a year. The Amsterdam-based fintech firm Adyen for years only reported financial results twice annually. But it began releasing quarterly business updates after its half-year earnings report in 2023 disappointed investors and sent its stock tumbling.

The cadence of only reporting results twice a year could mean investors miss key events entirely, if they happen in a span of a few months. General Motors in July said new tariffs on imported cars and auto parts took $1.1 billion out of its bottom line, which provided investors an early look at the impact of the Trump administration’s trade approach. The company’s stock fell more than 8%.

During the early months of Covid-19, quarterly earnings reports were crucial to investors looking for a read on how supply chain disruptions and stay-at-home mandates were impacting businesses across the world.

“I can’t recall an investor ever saying we should share less," Marc Suidan, chief financial officer at cloud-storage company Backblaze said. “Usually they’re asking me to share a lot more."

The potential change would also mean companies would need to provide guidance for six months out instead of three months, potentially making the numbers less precise and more volatile.

Any change is likely to take time. The SEC would typically open any proposal on the subject to a public comment period.

The SEC in 1970 mandated quarterly reporting of financial information, after decades of allowing “periodic" disclosure. The idea was that corporate disclosures every three months would provide more transparent, comparable financial details to investors.

“One of the reasons I invest in public companies instead of private companies more often is because you get that information," said James McRitchie, an individual investor in roughly 350 companies. “Timeliness is important."

Corporate executives for years have fretted about the time, costs and headaches associated with quarterly financial reports. Some have argued focusing on earnings reports and prepping for analyst calls eats up time and money that could be better spent running their businesses and creates an impetus to make short-term decisions.

Rahul Vashishtha, a professor of accounting at Duke’s Fuqua School of Business, says there is evidence that forcing companies to report more frequently led to fewer long-term investments. He studied changes made in the U.S. including in 1955 when the SEC switched to twice-annual reports from once-a-year and then again in 1970.

“There’s a hit to capital investments and it happens more so in industries where those investments take longer to pay off," said Vashishtha.

BlackRock CEO Larry Fink has long been a proponent of quarterly earnings reports. In a 2016 letter to CEOs, he called on executives to embrace long-term thinking but emphasized that companies should still report financials every three months.

Trump briefly explored doing away with quarterly reporting requirements during his first term. The SEC sought public comments on the proposal, but it didn’t advance further following a lack of strong support from companies.

Asset manager T. Rowe Price said at the time that even long-term oriented investors benefit from quarterly reports, “because these short-term progress reports increase our confidence in our ability to predict the company’s long-range outcome."