The current system mandates that publicly traded companies in the US report their financial performance quarterly. This practice, however, has drawn criticism from several quarters, notably from business executives who argue that it fosters short-term decision-making at the expense of long-term strategic planning. President Trump, echoing these concerns, recently advocated for a shift to semi-annual reporting. He believes that reducing the reporting frequency would lead to cost savings and allow executives to focus on the overall health of their companies rather than chasing short-term gains. His argument draws a parallel with China's reputed long-term business strategy.
However, this proposal has faced significant pushback from investor advocates and financial experts. They argue that less frequent reporting would diminish transparency and potentially increase the risk of fraudulent activities. The fear is that companies might conceal crucial information for extended periods, leaving investors vulnerable to unexpected shocks and market volatility. Professor Salman Arif of the University of Minnesota's Carlson School of Management highlights the increased risk of accounting fraud and insider trading in a less transparent environment. He emphasizes the importance of frequent disclosures as a mechanism to curb such activities and maintain the integrity of capital markets.
The Securities and Exchange Commission (SEC), the primary regulator for stocks in the US, has mandated quarterly earnings reporting since 1970. While large companies typically hold investor calls to discuss performance and future guidance, the frequency of these updates serves as a vital check and balance on corporate behavior. The Business Roundtable, representing prominent US companies, has previously voiced support for reduced reporting frequency, citing the pressure to prioritize short-term profits over long-term growth. However, finance experts counter that the current system ensures investor confidence and protects against unexpected negative surprises. Less frequent reporting could lead to heightened market volatility due to the lack of timely information.
Despite Trump's renewed push, implementing such a change would require extensive debate and consultation. While the SEC has indicated that it will prioritize this proposal, any significant shift from the decades-long practice of quarterly reporting is unlikely to happen swiftly. The debate highlights the inherent tension between fostering a business environment that encourages long-term strategic thinking and maintaining the transparency essential for investor confidence and market stability.
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Originally published at: https://www.npr.org/2025/09/15/nx-s1-5542137/trump-corporate-earnings-sec
