The US President, Donald Trump, has proposed changing the earnings reports of US public companies from quarterly to biannually. This suggestion aligns with the stance of the Long-Term Stock Exchange (LTSE), a nascent stock exchange based in Silicon Valley, California, which aims to provide more flexibility for companies in reporting their performance.
According to President Trump, shifting to semi-annual reporting will save costs and allow managers to focus on efficiently running their businesses. This proposal is aimed at streamlining financial reporting processes and reducing the burden on companies.
LTSE, founded in 2015 and approved by the US Securities and Exchange Commission (SEC) in May 2019, has also advocated for abolishing the requirement for quarterly reports and allowing companies to choose to publish their financial results twice a year. This initiative is not restricted to the few companies listed on LTSE but applies to all US public companies.
However, this proposed change may face opposition from investors who rely on the transparency provided by regular financial disclosures and seek more detailed information. Quarterly earnings reports are typically accompanied by earnings conference calls, during which analysts can question company executives.
Any modifications in reporting requirements will take time to come into effect, as the SEC usually announces proposals and seeks public feedback before making a decision.
Proponents of eliminating quarterly reporting argue that this change could revitalize the decreasing number of US public companies. Companies considering going public often cite the time-consuming and costly paperwork involved in listing and maintaining publicly traded stocks as a significant factor in their decision to remain private or pursue alternative routes.
Since a rule change in 2013, European public companies are no longer mandated to report earnings quarterly, although many still choose to do so. Similarly, the UK abolished the quarterly reporting requirement approximately a decade ago.
As per data from the Securities Price Research Center, the number of US public companies stood at around 3,700 as of the end of June, marking a 17% decrease compared to three years prior. This figure has halved since its peak in 1997.
President Trump had previously explored the idea of eliminating quarterly earnings reports during his first term, emphasizing the potential benefits of focusing on longer-term planning. In 2018, he instructed regulatory agencies to study this change, but progress was not made.
Furthermore, in the same year, Jamie Dimon, CEO of JPMorgan Chase, and legendary investor Warren Buffet co-authored a commentary in The Wall Street Journal supporting the notion of eliminating quarterly earnings guidance reports, although they clarified that they were not against quarterly reporting itself. Both highlighted how the pressure to meet quarterly earnings expectations could lead companies to curb spending and hiring.
Since 1970, public companies have been required to submit quarterly earnings reports.