Will the over-50-year tradition end? US stock quarterly reports may become semi-annual reports

The U.S. capital markets are brewing the most significant reform of information disclosure rules since the 1970s.

On March 16 local time, The Wall Street Journal cited sources saying that the U.S. Securities and Exchange Commission (SEC) is drafting a new proposal to eliminate the mandatory requirement for publicly listed companies to disclose their performance quarterly, allowing companies to choose to disclose financial reports every six months instead.

It is noteworthy that the new regulations do not fully abolish the quarterly reporting system; companies can still choose to maintain their existing disclosure frequency.

It is reported that the SEC is expected to submit the proposal as early as next month, and if approved, it will end the tradition of quarterly reports for publicly listed companies in the U.S. that has lasted for over 50 years.

Support: Reducing Burdens for Companies

The driving force behind this reform is none other than U.S. President Trump.

During his term, Trump has repeatedly expressed his preference for semiannual reporting, believing that the current quarterly reporting system is a heavy burden.

In September last year, he explicitly called on the SEC via social media to change the reporting cycle for corporate financial disclosures from quarterly to semiannual, stating that this would “save money and allow management to focus on running the company.”

Supporters of the reform point out that maintaining a publicly listed status requires a significant amount of time and money to handle compliance and paperwork, which is one of the key reasons many companies choose to remain private.

Data shows that the number of publicly listed companies in the U.S. has fallen from over 8,000 at its peak in 1996 to fewer than 4,000 by the end of 2024.

U.S. Treasury Secretary Scott P. Benset also endorsed this reform in September last year. He emphasized that Trump recognized that the public trading market is shrinking, and switching to semiannual reporting might be a way “to lower the costs of publicly listed companies without harming investor interests and to revitalize them.”

Moreover, the quarterly reporting system has been criticized as the culprit for fostering “short-termism” in companies. Under the pressure of capital markets, many executives have to sacrifice R&D investment or long-term strategy to meet quarterly profit forecasts.

Burns McKinney, an investment manager at NFJ Investment Group, stated: “Excessive focus on quarterly targets can lead to short-sighted decisions, while extending the disclosure period is more conducive to the rational allocation of capital.”

This viewpoint has the support of Wall Street executives such as “Oracle of Omaha” Warren Buffett and JPMorgan Chase CEO Jamie Dimon. Buffett has criticized “earnings reports theatrics” for years and bluntly stated in his 2022 shareholder letter: “Exceeding ‘expectations’ is touted as a management victory, and this manipulation is nauseating, one of the shames of capitalism.”

Opposition: Reduced Transparency

The voices opposing the reform are equally strong and well-founded.

Former U.S. Treasury Secretary Lawrence Summers emphasized that the U.S. capital markets thrive because they possess characteristics of “accountability and transparency,” stating that “frequent accountability disclosures and the ample sharing of information have always been at the core of the U.S. capital markets.”

Samir Samana, head of global equity and real assets at Wells Fargo Investment Institute, warned: “Longer reporting intervals will lead to greater uncertainty, which will also exacerbate market or price volatility during company reports.”

Brian Nick, head of portfolio strategy at wealth management firm Newedge Wealth, pointed out potential valuation impacts: “While the goal of Trump’s proposal is to make investors and companies more focused on long-term development, this will increase uncertainty in the stock market and could lead to a decline in valuations (i.e., a higher risk premium) due to the reduced frequency of new information releases. As the probability of underperformance increases and impacts become greater, the volatility during earnings season may also be larger.”

For retail investors, the problem of information asymmetry may worsen. Matt Maley, chief market strategist at asset management firm Miller Tabak+Co, stated: “Lack of transparency will increase the difficulty for investors, but it will also free up company management to focus on the business more long-term. This is definitely a double-edged sword. It will require higher accuracy in analysis from Wall Street.”

Other Lessons

At the end of last year, the Long-Term Stock Exchange (LTSE) based in New York applied to the SEC to change information disclosure frequency, and since then, the momentum for information disclosure reform has intensified.

In fact, other markets have already provided precedents for reform.

The European Union has not mandated quarterly financial disclosures for publicly listed companies since 2013, and the U.K. abolished the quarterly reporting requirement about a decade ago. The practices of these markets provide important references for U.S. reforms.

Experiences from Europe also show that even without mandatory requirements, many companies still choose to voluntarily release quarterly reports.

SEC Chair Paul Atkins pointed to the U.K. as an example, noting that after restoring the semiannual reporting system in 2014, some large companies continued to choose to release quarterly reports for their own needs. In his view, this proves that the market itself can effectively determine the frequency and depth of information disclosure.

Other Asian markets have also seen similar reforms. Singapore introduced quarterly reporting requirements for some companies in 2003 but completely abolished the related regulations in 2020, no longer mandating any companies to submit quarterly reports.

Starting in 2024, Hong Kong will adjust its disclosure rules for the Growth Enterprise Market, no longer requiring companies to submit quarterly reports, aligning the GEM with the main board by retaining only the requirements for semiannual and annual reports.

Jonathan Golub, chief equity strategist at Harbor Research Partners, pointed out: “When there is more information and transparency, capital markets and the overall economy operate more efficiently.” However, it is also necessary to consider the actual burdens on companies and the needs for long-term development.