The U.S. policy debate over corporate disclosure frequency has reignited after a proposal to permit semiannual reporting resurfaced in the current administration. While regulators are preparing to solicit public comment on loosening the longstanding quarterly earnings requirement, most market participants and a broad swath of investors say they expect companies to largely continue reporting every three months.
Proposals to shift from mandatory quarterly filings to biannual reporting were reintroduced last year by President Donald Trump, reviving an idea from his previous term. The Securities and Exchange Commission is anticipated to formally request feedback from the public on a plan that would remove the obligation for quarterly earnings reports and give companies greater flexibility on reporting cadence.
Investor pushback and valuation concerns
Buy-side managers and other market participants argue that abandoning quarterly disclosures could make it harder for investors to value companies accurately and might lead to market disruption. Sam Rines, macro strategist at WisdomTree Asset Management, said that any established company electing to switch to less frequent reporting "will pop up on the screens of active investment managers and be a candidate for being downsized or removed from portfolios, or have valuations reconsidered." He added bluntly: "We want, we need, more information, not less."
At a recent Securities and Exchange Commission investor advisory committee meeting, large buy-side firms reiterated those concerns. Representatives from Citadel, the hedge fund founded by Ken Griffin, and Fidelity warned that moving away from quarterly updates could raise market volatility and increase the cost of capital for companies that opt into semiannual reporting. They also said regular quarterly reporting plays a role in supporting accurate market valuations.
Citadel declined further comment to inquiries, and Fidelity did not respond to requests for additional remarks.
Corporate reactions and continued disclosure commitments
Even institutions broadly supportive of a potential change to reporting frequency say they plan to maintain frequent communication with investors. JPMorgan Chase, while broadly backing the anticipated administration proposal as a way to strengthen capital markets, told the market it would continue to provide quarterly guidance through conference calls with analysts and investors.
Market strategists expect corporate boards to weigh potential cost savings against the reputational and valuation risks of reducing disclosure frequency. Rines said he believes the idea may be "a tough sell" to directors who must consider whether fewer updates would cause their shares to be seen as riskier by the investment community.
Regulatory stance and market-driven approach
An SEC spokesperson declined to comment on the exact timing of the proposal's publication. The agency indicated that Paul Atkins, the SEC chair, favors letting the marketplace determine the appropriate reporting cadence for individual companies - taking into account factors such as industry, company size and investor expectations.
Smaller issuers and certain sectors could be more receptive
The SEC has required quarterly reporting from publicly traded U.S. companies since 1970. Some market participants note that companies outside the U.S. already operate under different disclosure schedules and that private businesses often provide even less frequent performance updates.
Smaller companies, and firms contemplating initial public offerings, may be more inclined to choose semiannual reporting if the rule is changed. In a white paper last year, Nasdaq argued that quarterly reporting can be particularly burdensome for small and medium-sized enterprises. Jordan Stuart, investment director at Federated Hermes, said that less frequent reporting "can be particularly beneficial for small-cap growth investors because it shifts focus away from short-term noise and back toward the multi-year value drivers that matter most." He added that industries such as biotechnology, where research and innovation timelines extend over years, may benefit because quarterly disclosures can overemphasize shorter-term metrics like cash burn or interim trial results.
Nevertheless, some money managers said they might continue to prefer quarterly updates even if smaller firms opt for semiannual filings. One reason is the notable decline in analyst coverage for many small-cap companies, a trend that quarterly reporting can help counteract by supplying more frequent public information to investors.
Arguments about the number of public companies and regulatory burden
Proponents of reducing reporting frequency say it could help address the long-term drop in the number of U.S.-listed companies. The count of publicly traded firms peaked at roughly 8,800 in the late 1990s and has fallen to about 4,200. Supporters argue that the paperwork and compliance costs associated with frequent reporting have contributed to that decline and that less frequent filings might make public listings more attractive.
Still, many investors indicated that even those smaller companies might voluntarily stay on a quarterly schedule to compensate for diminished analyst coverage and remain visible to the investment community.
Investor perspective and the value of information
Jack Ablin, chief investment strategist at Cresset Wealth, recalled the operational burden of preparing quarterly investor presentations while working at a public company, describing them as "dog and pony shows." Yet, when viewed from the standpoint of portfolio managers, Ablin said more frequent information is preferable. "As a portfolio manager, I know that more information is always better," he said.
Market-facing communication may persist regardless of a rule change
Even if the SEC adopts a rule removing mandatory quarterly earnings filings, the actions of large financial institutions and the reactions of investors suggest that many companies will opt to keep providing quarterly updates in some form. Banks like JPMorgan have already signaled plans to maintain conference calls and guidance, and buy-side concerns point to potential market penalties for firms that scale back disclosure.
Summary
Regulatory proposals to allow semiannual reporting have been revived and the SEC is expected to seek public comment. Despite potential cost and administrative benefits for issuers, most investors and many firms anticipate that the majority of U.S. public companies will continue quarterly reporting because of concerns about valuation, investor reaction and the loss of information that supports market pricing.
Key points
- Regulators are preparing to request public comments on a proposal to remove the mandatory quarterly earnings reporting requirement and permit semiannual disclosures.
- Large investors and some buy-side firms warn that companies switching to less frequent reporting could face valuation reconsideration, greater volatility and higher costs of capital.
- Smaller companies and sectors with long development cycles, such as biotech, may be more inclined to adopt semiannual reporting, but many may still prefer quarterly updates to counter declining analyst coverage.
Risks and uncertainties
- Companies that cut back to semiannual reporting could be penalized by investors, potentially leading to downsizing in portfolios or reduced valuations - affecting equity markets and investor relations.
- Reducing reporting frequency could increase market volatility and raise the cost of capital for firms that make the change, as warned by large buy-side investors.
- There is uncertainty over how many companies - particularly small-cap issuers - would actually opt for semiannual reporting versus continuing quarterly disclosures to preserve analyst interest and investor visibility.
Tags: quarterly, SEC, reporting, disclosure, markets