President Trump is asking the SEC to no longer require report quarterly earnings. Instead, companies would report results every six months.
This may be good news for those who believe that publishing frequent earnings reports encourage a short-term focus. The idea is that investors make rash decisions based on the results from only three months.
One downside of the change could be less transparency. The value of quarterly reports is that investors are more aware of what's happening. In addition, the process itself may be useful internally, as a former investment banker explains:
"What I see from the inside of the quarterly earnings cycle is that there’s actually a lot of discipline in it. That process of having to prepare it, release it, explain it and answer questions has real value.”
Also, not everyone agrees that eliminating the report will foster longer-term thinking. As a compromise, some are proposing that reports are still published, but that specific earnings-per-share guidance information isn't included.
- Describe the importance of transparency in financial reporting. How does this relate to accountability?
- What's your view of the proposal to eliminate quarterly reports? Do you see additional benefits or downsides than what is mentioned here?
- In his tweet, President Trump refers to making "business (jobs) even better." How do you see this as a result of his proposal?