Former President Donald Trump has even called on the United States to scrap quarterly earnings reports altogether. By taking this action, he thinks investors will be better served because company executives will be free to focus on the long-term interests. He thinks that the focus today on all the short-term, one-time metrics is really a distraction from creating sustainable growth and better stewardship.
Quarterly earnings reports have traditionally been a crucial tool for protecting investors’ interests, providing regular updates on companies’ financial health. By putting a spotlight on what government is spending and where, these reports allow investors to make more informed investment decisions. Trump’s proposal now puts U.S. practices on par with those in the U.K. and European Union, where companies must report at least semiannually. Firms in these areas must choose to release quarterly reports in advance. This decision gives them far greater flexibility to make choices than exists here in the U.S.
In his speech, Trump made a pretty strong case for taking a longer view on corporate stewardship. He noted, “Did you ever hear the statement that, ‘China has a 50 to 100 year view on management of a company, whereas we run our companies on a quarterly basis??? Not good!!!’”
U.S. Special Treasury Secretary Scott Bessent endorsed the idea in Trump’s proposal, arguing that semiannual reporting would be popular with investors. He highlighted current trends in public markets, remarking, “President Trump realizes that whether it’s the U.K. or it is the U.S., our public markets are atrophying, and this might be one way to bring back and cut costs for public companies without harming investors.”
The U.S. market has seen a 60 percent plunge in the number of publicly listed companies. It fell from more than 7,000 in 1996 to under 4,000 by 2020. As a result, many firms are choosing to go the other direction by staying private, complaining about greater third-party oversight and compliance burdens related to quarterly reporting. This troubling trend has serious longterm implications for the health and future prosperity of the U.S. capital markets.
Arm and Spotify, foreign companies that have gone public in the US, benefit from such exemptions through the foreign private issuer scheme. This enables them to avoid the need to report quarterly. Surprisingly, many of these firms still voluntarily elect to comply with quarterly reporting.
The regulatory landscape can affect international competitiveness. Monetary companies listed on the Hong Kong exchange are required to conserve money. Those on the mainland of China must report on a quarterly basis. A shift away from quarterly reporting in the U.S. could potentially make American markets more attractive to European companies looking to reduce compliance costs.
Over the last ten years, notable European firms have fallen over themselves to list on U.S. exchanges. They’ve been lured by higher valuations and a more welcoming regulatory environment. Opposition rooted in fears over compliance costs is mounting. This can lead firms to reconsider their exposures to global markets.
The Council of Institutional Investors has rightly expressed concern that moving away from quarterly reporting would undermine shareholder protections. They argue that it is this proposed change that would erode investor protections. As discussions around this proposal unfold, stakeholders across various sectors will need to weigh the potential benefits against the risks of reduced financial transparency.