Abandoning Quarterly Earnings Report Requirements and Its Impact on Long-Term Value Creation

The debate over whether to abandon quarterly earnings reports has intensified as policymakers and corporate leaders grapple with the tension between short-term financial pressures and long-term strategic goals. Proponents argue that the quarterly reporting cycle fosters "managerial myopia," diverting attention from innovation, sustainability, and long-term value creation. Critics, however, warn that reducing reporting frequency risks eroding transparency and investor trust. This analysis explores how shifting to semi-annual reporting could realign corporate governance and investor focus with strategic, long-term performance metrics-and the implications for investment strategies in a post-quarterly world.

The Case for Ending Quarterly Reporting

The quarterly earnings treadmill compels companies to prioritize short-term results over long-term investments. Research from the Tel-Aviv Stock Exchange (TASE) reveals that firms switching to semi-annual reporting saw a 19.8% reduction in audit hours and a 16% drop in annual audit fees, according to a Columbia Law blog post, suggesting significant cost savings. However, those benefits came at a cost: a 2% average decline in stock price, likely due to investor concerns over reduced transparency. This trade-off underscores the dual-edged nature of the shift.

Proponents, including President Donald Trump and CEOs like Jamie Dimon and Warren Buffett, argue that semi-annual reporting would allow managers to focus on innovation and capital expenditures without the "distraction" of quarterly expectations, as described in a GovFacts article. For instance, companies in capital-intensive sectors such as chemicals and energy-where R&D cycles span years-could redirect resources toward sustainable projects like recycled materials or energy transition initiatives, a point also raised in that GovFacts piece. Such strategies align with broader trends in long-term value creation, where profitability is increasingly tied to environmental and social outcomes, according to a Sustainalytics analysis.

The Risks of Reduced Transparency

Critics caution that less frequent reporting could exacerbate information asymmetry, increasing the risk of selective disclosure and insider trading, according to an EdelmanSmithfield analysis. The UK's experience with quarterly reporting from 2007 to 2014 demonstrated that frequent disclosures correlate with higher analyst accuracy and investor confidence, a pattern noted in the Sustainalytics analysis. Similarly, academic studies highlight that quarterly reporting deters earnings manipulation by subjecting companies to regular scrutiny, a point echoed in the Columbia Law blog post. Without this oversight, firms might prioritize short-term fixes-such as cost-cutting in workplace safety or environmental compliance-to meet semi-annual targets, a concern raised in the GovFacts discussion.

Moreover, the technology sector, which thrives on rapid innovation and investor speculation, could face heightened volatility under a semi-annual regime. A 2025 article in Fortune warns that six-month gaps in reporting could amplify uncertainty, particularly in fast-moving markets where quarterly updates are critical for assessing momentum. This raises questions about whether the benefits of reduced short-termism outweigh the risks of destabilizing investor sentiment.

Realigning Governance and Investor Focus

To mitigate these risks, corporate governance frameworks must evolve alongside reporting requirements. Firms adopting semi-annual reporting must enhance transparency through continuous disclosure of material information and robust ESG (environmental, social, and governance) reporting, as recommended in the EdelmanSmithfield analysis. For example, companies with strong governance structures-such as larger boards and diverse directorship-have shown greater resilience in maintaining financial reporting quality during periods of economic stress, a resilience documented in the Columbia Law blog post. Such practices could help rebuild investor trust in a semi-annual model.

Investors, in turn, must adapt their strategies to prioritize long-term metrics. This includes evaluating firms based on innovation pipelines, ESG performance, and capital allocation efficiency rather than quarterly earnings surprises. The Norwegian Government Pension Fund, for instance, has emphasized the importance of "double materiality" assessments-evaluating both the financial impact of ESG factors and a company's societal and environmental footprint-which the Sustainalytics analysis highlights. This approach aligns with the growing recognition that long-term value creation requires balancing profitability with sustainability.

Investment Strategies for a Post-Quarterly World

For investors seeking to capitalize on the shift away from quarterly reporting, several sectors and strategies stand out:
1. Capital-Intensive Industries: Sectors like chemicals, energy, and advanced manufacturing-where long-term R&D and infrastructure investments are critical-could benefit from reduced short-term pressure. For example, companies investing in recycled materials or carbon capture technologies may see accelerated returns as they avoid quarterly cost-cutting pressures, a scenario described in the GovFacts article.
2. ESG-Aligned Portfolios: Firms with robust ESG frameworks are better positioned to navigate the governance challenges of semi-annual reporting. These companies often disclose more comprehensive sustainability metrics, providing investors with reliable long-term indicators, as noted in the Sustainalytics analysis.
3. Active Ownership: Investors can leverage their influence to advocate for transparent governance practices in firms transitioning to semi-annual reporting. This includes pushing for regular, non-financial disclosures and stronger board accountability, a strategy supported by the EdelmanSmithfield analysis.

Conclusion

The debate over quarterly earnings reports reflects a broader struggle to redefine the purpose of public markets. While the quarterly cycle has long served as a safeguard for transparency, its role in stifling long-term innovation is undeniable. A shift to semi-annual reporting, if accompanied by stronger governance and continuous disclosure, could unlock new avenues for sustainable value creation. However, this transition demands careful calibration: investors must balance the promise of reduced short-termism with the risks of diminished oversight. For those who navigate this shift wisely, the rewards-both financial and societal-could be profound.