Imagine having to prepare for a colonoscopy four times a year.
Now imagine approximately 4,000 chief financial officers doing that — all at once — every quarter. Welcome to earnings season.
For more than 50 years, quarterly reporting has been the metronome of U.S. financial markets. Like daylight savings or Thanksgiving arguments, it is baked into our economic rhythm.
Every three months, public companies must bare their financial souls to investors, analysts, competitors and journalists hungry to scrutinize margins and future guidance.
But now, an old idea has resurfaced: ditch quarterly earnings and move to semiannual disclosures. At first glance, the proposal sounds reasonable.
President Donald Trump recently resurrected the idea, echoing earlier musings from his first term. “This will save money and allow managers to focus on properly running their companies.”
But before tossing 10-Qs into a regulatory recycling bin, we should ask: What exactly are we saving and what might we be losing?
Disclosure costs — or price of admission?
There is no denying quarterly reporting is time-consuming, frustrating and expensive.
According to the Financial Executives Research Foundation, average cost of compliance and financial reporting can be hundreds of thousands annually, millions for large firms. This includes accounting and legal fees, communications and investor relations teams that could staff a small law firm.
Top executives spend earnings season prepping for landmines — fielding the same analyst questions on loop, hoping a single eyebrow twitch doesn’t tank the stock.
What was once financial reporting evolved into a quarterly Kabuki Theater: meticulously choreographed, emotionally restrained and entirely performative — all for the benefit of markets that mostly know the script.
Zoom founder Eric Yuan even outsourced the monotony to an artificial intelligence (AI) avatar. Can you blame him?
While Securities and Exchange Commission (SEC) regulations require disclosure of material information — such as news releases and investor presentations — there’s no rule mandating earnings investor calls, although it has become a part of the quarterly proctology.
Earnings calls allow companies to clarify results, steer the narrative, manage expectations and offer a public forum to address questions they legally can’t answer in private, keeping everyone on equal footing.
Transparency is never free — but opacity is far more expensive
Actual cost of moving to semiannual reporting is not financial, it is informational.
Markets are oxygenated by data. Reducing disclosures and transparency means choking off the lifeblood, which keeps investors informed and prices rational.
With fewer updates comes more uncertainty — and higher risk premiums, which translate into complex capital costs. A rich body of academic research shows when companies disclose less frequently, investors demand higher returns to compensate for increased opacity. What’s saved on audit bills is lost on the trading floor.
Besides, the vocal advocates for ditching quarterly reporting – mostly small, private-leaning companies or billionaires with a fondness for deregulation – aren’t exactly pleading on behalf of individual investors.
This is not about democratization of investing. It’s about reducing scrutiny.
Whose time horizon, exactly?
One convincing argument against quarterly reporting is that it encourages “short-termism” – the idea that companies, eager to meet analyst estimates, cut long-term investments just to juice the next earnings call.
There is a nugget of truth here. Some executives play games to beat expectations, positioning expenses, shifting revenues, managing accruals like financial magicians.
But if you’re making bad decisions every three months, you’ll likely just make bigger bad decisions every six. Besides, if quarterly reporting is such a damper on long-term investment, someone forgot to tell big tech.
Amazon, Google, Meta – all report quarterly and manage to spend billions annually on futuristic moonshots. U.S. corporate investment as a share of GDP remains robust, despite the “burden” of talking about it every 90 days.
Less frequent reporting disproportionately hurts individual investors
Institutional players – hedge funds, private equity firms,’ activist investors have deep research and cozy management chats … while individual investors rely heavily on quarterly company disclosures for information on their investments.
If public disclosures decline, the edge tilts even further toward those already holding the edge.
Want a system that gives insiders more room to maneuver and the public less insight and transparency into what’s going on? That’s China’s capital markets – which, despite having their own quarterly disclosure rules, often suffer from lack of enforcement and financial opacity.
Ask anyone trying to untangle Evergrande’s balance sheet.
And yes, the European Union (EU) moved away from quarterly mandates. But 60–70% of large-cap EU companies continue to report earnings quarterly, maintaining transparency for investors despite the absence of a legal mandate.
In contrast, 30–40% of mid- and small-cap firms report semiannually, aligning strictly with minimum EU regulatory requirement.
Additionally, many firms maintain quarterly reporting to meet index inclusion or U.S. investment flows.
Does quarterly reporting need reform? Absolutely
Earnings guidance, not reporting, drives short-term thinking. And today’s edge isn’t timing; it’s tech.
AI tools like Kensho and Alpha Sense let institutions parse sentiment before transcripts hit the wire. Quant firms react in milliseconds. Institutional investors combine these tools with alternative data to spot surprises before they’re announced.
Fewer reports just widen that gap. Trim the process, not the principle.
Public markets are a social contract, seeking candor, not curtains
In finance, as in life, the scariest things happen when the lights go out. Whether the rules change or not, what really matters is what investors demand — and what markets are willing to tolerate.
The opinions expressed in Fortune.com commentary pieces are solely the views of their authors and do not necessarily reflect the opinions and beliefs of Fortune.
