Should Quarterly Earnings Be Scrapped?

New proposed policy that will impact your 401k and company behavior

This Week in Economic Data

It is a quiet week in economic data. The data releases on our radar are scheduled for Tuesday. At 8:30 a.m., the U.S. trade deficit is released, and at 3 p.m., we learn more about consumer credit. We also have several Federal Reserve presidents and Board members speak to the media this week.

A government shutdown means no public data releases.

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Should Quarterly Earnings Be Scrapped?

President Trump and SEC leadership have proposed eliminating mandatory quarterly reports in favor of semiannual reports.

It sounds like a technical accounting change, but this shift could ripple across your retirement account, the cost of raising capital, and even how corporate strategy gets made. Let’s decode what’s really at stake.

If Wall Street’s quarterly updates disappear, who feels it first? Will it be investors, businesses, or auditors? We may soon find out.

The Context

Quarterly reports have been the rhythm of U.S. markets since the 1970s. They shape earnings calls, trading strategies, and, indirectly, your 401(k) or pension. Even if you don’t read them, the fund managers handling your retirement do.

Moving to semiannual reports isn’t simply “good” or “bad.” Like most things in economics, it’s about trade-offs.

Investors: Less Info, Bigger Surprises

First, let’s consider the primary target for these reports: Investors. Investors use quarterly reports to assess the financial and operational health of companies, enabling them to make informed decisions about their overall well-being. Changes to the current rule will likely have the following ramifications.

• Information drought: Retail investors may be left in the dark for six months or more. This will make it harder for them to gauge the overall success of a company and make effective decisions around owning parts of that company.

• Sharper shocks: Without quarterly updates, earnings “shocks” may be more pronounced, causing stock prices to fluctuate more violently. Day-to-day swings could calm, but when earnings finally hit, the shocks may be larger, and dramatic shifts in the stock prices of publicly traded companies are expected to occur. Anyone overly exposed to a specific security will be inheriting more risk.

• Asymmetry information: Insiders and large institutional investors may gain an edge, thereby widening the gap between smaller shareholders. This is likely to contribute to economic inequality and may have negative consequences for market diversity.
  Tea Leafs: Investors will have to rely on alternative data sources to make sense of the economy. Credit card data, supply chain signals, and satellite images, or anything else, to gain insight into what might happen to stocks.

Businesses: Breathing Room vs. Higher Costs

This move can be good for businesses, and it has been received positively by CEOs.

• Lower compliance burden: Fewer filings cut costs and reduce the pressure of quarterly “earnings theater.”

• Focus on long-term strategy: Without the quarterly treadmill, leaders have more space to focus on the big picture, capital investments, product innovation, and research and development. Freed from the fear of missing a quarterly earnings target, firms can prioritize strategies that build long-term value, rather than focusing solely on short-term gains.

The part that CEOs don’t like:

• Risk premium tradeoff: Less disclosure makes investors uneasy, which could lead to higher borrowing costs.

• Rethinking investor relations: Silence won’t fly; companies may lean on ESG reports, investor days, or voluntary updates.

Auditors: The Quiet Middlemen

Bad news for auditors and accountants.

• Lost interim work: Fewer quarterly reviews mean less steady revenue for audit firms.

• Higher-stakes audits: Problems may go undetected until year-end, thereby increasing liability risk.

• Reputation risk: If scandals erupt, auditors could be blamed for not catching them early.

The Bottom Line

Scrapping quarterly reporting will reshape the relationship between markets, companies, and watchdogs. Investors may face bigger surprises, businesses may get breathing room but pay higher capital costs, and auditors must reinvent their role.

A core principle in free markets is the availability of complete and accurate information. This move shifts us away from the conditions for optimal decision-making and increases investor risk.

Reader Question: Do you think less frequent reporting will help companies focus on long-term growth, or will it just leave investors (and you) more in the dark?

About the Author

Antowan Batts writes for Business Without Borders, a publication designed for working professionals seeking perspectives beyond the headlines. Each issue breaks down how business and economic shifts cross borders and impact decision-making in companies, careers, and everyday life.