PROVIDENCE, RHODE ISLAND, April 24 - A renewed push to let companies report financial results every six months rather than every three has re-ignited a debate over how much information public markets should demand and how often. The proposal, revived by the administration, is expected to be followed by a formal request from the U.S. Securities and Exchange Commission for public comment on removing the current quarterly earnings reporting mandate.
Advocates of the change say it would free corporate management teams to concentrate on longer-term strategy and cut some of the costs and paperwork tied to being public. But portfolio managers, hedge funds and other institutional investors caution that reducing the frequency of mandated reporting could invite negative investor reactions for companies that choose to switch.
Sam Rines, macro strategist at WisdomTree Asset Management, warned that established firms that move to less frequent reporting would attract attention from active managers and could be subject to portfolio trimming or removal, with valuations reassessed. "Any established company that makes this shift 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 said. "We want, we need, more information, not less."
A number of large market participants voiced similar concerns at a recent Securities and Exchange Commission investor advisory committee meeting. Buy-side firms including Citadel and Fidelity told the committee that eliminating quarterly reports could raise stock price volatility and increase the cost of investment capital for companies that adopt the change, while also undermining the accuracy of market valuations. Citadel declined further comment, and Fidelity did not respond to requests for further comment.
Reflecting an expectation among many investors, Mike Reynolds, vice president for investment strategy at Glenmede, said: "Our expectation is that the vast majority of companies will continue to report quarterly." Reynolds and others suggested that continuing to report every quarter remains the default choice for corporate issuers that value steady investor access and predictable analyst scrutiny.
Notably, major financial institutions have signaled they would continue to provide quarterly information to the market even if the rule changes. JPMorgan Chase said it would keep offering quarterly guidance through conference calls with analysts and investors. The bank did not immediately respond to requests for further comment.
Within corporate boardrooms, the choice is likely to be complicated. Rines said he believes the proposal could be "a tough sell" to directors weighing the potential compliance savings against the risk their stock could be perceived as more speculative if reporting is reduced.
The SEC has required quarterly earnings reports from publicly traded U.S. companies since 1970. But money managers noted that many markets outside the United States already allow less frequent reporting, with some companies overseas publishing results twice a year and private firms providing even sparser updates.
Smaller firms or companies preparing for an initial public offering could be among those more open to semiannual reporting, market participants said. Last year, Nasdaq published a white paper arguing that quarterly disclosure is particularly burdensome for small and medium-sized companies.
Jordan Stuart, investment director at Federated Hermes, argued that less frequent reporting could help small-cap growth investors by shifting attention away from short-term noise and toward multi-year value drivers. He suggested that companies in sectors such as biotech, where innovation and research timelines can stretch for years, may find quarterly metrics like cash burn or isolated trial results misleadingly prominent.
Some proponents of the change frame it as a measure that could help reverse the long-term decline in the number of U.S. listed companies. The count of public companies in the United States peaked at about 8,800 in the late 1990s and has fallen to roughly 4,200. Exchanges, banks and others contend that the paperwork and costs associated with frequent reporting have discouraged some firms from remaining public.
Yet market participants also noted a countervailing force: the decline in analyst coverage of small-cap stocks. Even if the regulatory option to report semiannually were available, companies may prefer quarterly disclosure to encourage analyst follow‑up and maintain visibility with investors.
Jack Ablin, chief investment strategist at Cresset Wealth, recalled the burdensome routine of preparing frequent investor presentations while working at a public company and described them as "dog and pony shows." Still, speaking from the perspective of an investor, he emphasized the value of information flow: "As a portfolio manager, I know that more information is always better."
A spokesman for the SEC declined to comment on the timing of the proposal's release, while noting that Paul Atkins, the agency's chair, prefers that markets determine the optimal reporting frequency based on factors such as a company's industry, size, and investor expectations.
Where the debate currently rests
- Regulators are expected to solicit public comment on a proposal to make quarterly reporting optional, moving to a possible semiannual standard for some or all companies.
- Large investors and some buy-side firms warn that companies opting for less frequent reporting could face investor pushback, higher capital costs and greater volatility.
- Smaller companies and sectors with long development cycles, such as biotech, are discussed as potential beneficiaries of reduced disclosure frequency, but market visibility and analyst coverage concerns may still compel them to continue quarterly reporting.