Quarterly Earnings Reform: Balancing Long-Term Strategy and Investor Transparency

The debate over quarterly earnings reporting has intensified in 2025 as President Donald Trump's proposal to shift public companies to semiannual reporting gains traction. This reform, which would align U.S. practices with those of the UK and EU, promises to reduce regulatory burdens and curb short-termism but raises critical questions about transparency, market efficiency, and investor trust. For investors, understanding the trade-offs between long-term corporate strategy and real-time financial disclosure is essential to navigating the evolving capital markets landscape.

The Case for Semiannual Reporting: Strategic Focus and Cost Efficiency

Proponents argue that quarterly reporting distorts corporate decision-making by incentivizing short-term profit maximization at the expense of long-term innovation and sustainability. A 2025 Bloomberg report highlights that companies like Apple and Microsoft have long advocated for reduced reporting frequency, citing the “distraction” of meeting quarterly expectations as a barrier to strategic investments in R&D and capital expenditures Trump Proposes to Cut Quarterly Reports for Public Companies^[1].

Supporters also emphasize cost savings. A study of the Tel-Aviv Stock Exchange (TASE) found that firms switching to semiannual reporting reduced compliance costs by 19.8%, primarily through lower audit hours and fees How Shifting to Semi-Annual Financial Reporting Affects Market Dynamics and Governance^[2]. For smaller firms, these savings could be transformative, allowing resources to be redirected toward operational improvements. Additionally, semiannual reporting may mitigate the pressure to “manage” earnings, potentially improving financial reporting quality by reducing aggressive accounting practices Quarterly versus Semiannual: Three Essays on Assessing the^[3].

The Risks of Reduced Transparency: Investor Confidence and Market Volatility

Critics, however, warn that less frequent reporting could erode investor confidence and amplify market volatility. A 2024 analysis by Armstrong Economics notes that the TASE study also revealed a 2% average drop in stock prices for firms adopting semiannual reporting, compared to a 2.5% increase for those retaining quarterly disclosures Quarterly vs Semi-Annual Earnings Reports^[4]. This suggests that investors value frequent updates as a signal of transparency and accountability.

The European experience offers further caution. While the UK and EU have moved away from mandatory quarterly reporting, governance experts point to mixed outcomes. A Columbia Law School study found that firms in these regions often compensate for reduced external reporting with weaker internal oversight, leading to declines in board diversity and audit rigor The real effects of financial reporting: Evidence and suggestions^[5]. Such governance gaps could exacerbate information asymmetry, particularly in volatile sectors like retail or aviation, where quarterly data is critical for tracking performance trends Should the SEC ditch quarterly reporting?^[6].

Regulatory Dynamics and Market Implications

The U.S. Securities and Exchange Commission (SEC) has positioned itself as a key arbiter in this debate. Under Chair Paul Atkins, the agency has prioritized deregulation, including delaying climate-related disclosure rules and scaling back audit requirements Regulatory and Financial Reporting Changes for 2025^[7]. While this aligns with Trump's push for semiannual reporting, it also reflects broader ideological shifts toward reducing compliance burdens.

However, the SEC's role in maintaining market efficiency cannot be overlooked. Quarterly reporting provides investors with timely data to assess company performance, which is particularly vital for retail investors and algorithmic traders. A 2024 study by George Mason University found that more frequent reporting correlates with higher future earnings response coefficients (FERC), indicating that investors use quarterly data to better anticipate long-term trends Quarterly vs Semi-Annual Earnings Reports^[8].

Navigating the Trade-Offs: A Path Forward

For investors, the key lies in balancing the benefits of reduced short-termism with the risks of diminished transparency. Firms that adopt semiannual reporting may gain flexibility to pursue long-term goals, but they must compensate with robust internal governance and proactive communication. Conversely, investors should demand stronger safeguards, such as enhanced audit standards and real-time disclosure of material events, to mitigate information gaps.

Conclusion

The proposed shift to semiannual reporting represents a pivotal moment for U.S. capital markets. While it offers tangible benefits for corporate strategy and cost efficiency, it also risks undermining the transparency that underpins investor trust. As the SEC weighs this reform, stakeholders must advocate for a balanced approach that preserves market integrity while fostering long-term value creation.