Ditch quarterly earnings like Trump says? What's needed is better reporting - not less.

By Robert Pozen and Mark J. Roe

The costs of moving to semiannual reporting clearly outweigh any benefits

President Donald Trump has proposed that public companies issue semiannual reports instead of quarterly reports.

It is highly doubtful that replacing quarterly with semiannual reporting will induce corporate executives to make longer-term business decisions.

President Donald Trump has proposed that U.S. public companies issue semiannual reports instead of quarterly reports. In his view, shifting earnings statements from every three months to every six months would allow managers "to focus on properly running their companies." In support of his proposal, the president praised the long-term - sometimes 50 years - approach of Chinese companies, as compared with the quarterly cadence of U.S. companies.

Trump unsuccessfully made a similar proposal during his first term, but it is now gaining more momentum. Last week, the Long Term Stock Exchange, a new trading venue in Texas, announced that it would ask the Securities and Exchange Commission to allow companies traded there to report every six months. This week, Adena Friedman, chief executive at Nasdaq, floated the idea of giving public companies the option of semiannual or quarterly reporting as a way to mitigate the challenges of "short-termism" in corporate decisions.

In several European countries, public companies are required to report only every six months, though some still report every three months. The United Kingdom went from semiannual reporting to quarterly reporting in 2007 and back to semiannual reporting in 2014. The latter move was an explicit effort to fight short-termism and encourage a longer-term perspective among U.K. public companies.

A six-month perspective on earnings is hardly long term.

While quarterly reporting as presently practiced in the U.S. has its drawbacks, the costs of moving to semiannual reporting clearly outweigh its benefits.

On the alleged benefits, it is highly doubtful that replacing quarterly with semiannual reporting will induce corporate executives to make longer-term business decisions. Do we really believe that moving from quarterly to semiannual reporting will bring many new five-year investments, much less the 50-year perspective attributed to China? Having a six-month perspective on earnings is hardly long term.

One of us co-authored an empirical study on the actual effects of the U.K.'s shift from quarterly to semiannual earnings around 2014. If that shift led to longer-term thinking on the part of executives of U.K. companies, such thinking should have been reflected in more capital investments and higher spending on research by U.K. companies.

Neither happened. Moreover, the evidence for short-termism in American public companies is quite weak. For instance, although critics may argue that quarterly reporting is pressuring corporate America to cut long-term R&D, the facts show corporate R&D to be steadily rising in the United States.

If the U.S. government wanted to encourage U.S. executives to take a longer-term perspective on company earnings, it should push to change the compensation incentives now given to most U.S. executives. In most U.S. companies, top executives are paid based on the revenues and earnings of the past year. By contrast, if top executives were paid based on the financial record of the company over the past three or five years - or in stock that could not be readily cashed in until years later - they would take a longer-term approach to company growth.

On the cost side, quarterly reports are important to security analysts and institutional investors, who want up-to-date information on a company's revenues and earnings. Without this information, stock prices could become stale, thus leading to more inefficient capital markets. Even worse, with companies going dark for six months, the gap between inside information and public information would widen - increasing the temptation for insider trading. For investors to move capital to its best use in America, they need up-to-date information.

Giving listed companies the option of reporting on a quarterly or semiannual basis would be particularly problematic. To evaluate companies effectively, securities analysts systematically compare the financial results of companies in the same industry. If, for example, Home Depot reported semiannually but Lowe's reported quarterly, security analysts could not easily make such comparisons.

Quarterly reporting can be significantly improved. Many U.S. companies issue earnings projections for the next quarter along with their quarterly reports on the past quarter. Both Berkshire Hathaway's (BRK.A) (BRK.B) Warren Buffett and JPMorgan Chase (JPM) CEO Jamie Dimon have rightfully argued for an end to this practice. We agree. If actual earnings in the next quarter are even one penny below the company's projections, its stock price usually takes a hit.

Read: Do investors care about quarterly vs half-year reporting? Here's what the numbers say.

Today, almost all public companies issue a short press release summarizing their quarterly revenues and earnings. This is a valuable document. Management carefully drafts the summary, which is then closely reviewed by independent directors on the company's audit committee. When the earnings release is issued, around three weeks after the quarter's end, management typically hosts a detailed conference call for investors and analysts.

Still, the company must fill out and file a quarterly 10-Q report with the SEC - usually at least a week after the earnings release. The 10-Q is filled with legal jargon and accounting boilerplate. Most investors could not identify the few sentences in a 10-Q that are not a repeat of the previous quarter's filing. Yet management consumes considerable time and effort in preparing this form.

We suggest the SEC require an annual report at the end of a company's fiscal year and a full semiannual report - which would describe the company's business, its competitors, and its risks as well as management commentary on all of the above, especially any material changes.

In the two other quarters, companies would be required to disclose only an unaudited balance sheet and income statement, plus a narrative statement of any material events that occurred during the past quarter, with no management projections for the next quarter.

By mandating a slimmed-down version of the two quarterly reports, the SEC would reach an appropriate balance - providing investors with the material information they need to buy and sell securities, while reducing the time and effort by management to fulfill a company's filing requirements.

Robert Pozen is a senior lecturer at MIT Sloan school of Management and former president of Fidelity Investments. Mark J. Roe is a professor at Harvard Law School.

More: SEC prioritizes Trump's plan to scrap quarterly earnings reports. Why it's bad for investors.

Also read: Trump revives call to ditch quarterly earnings - and this time, the SEC may listen

-Robert Pozen -Mark J. Roe

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09-18-25 1823ET