Should Companies Report Annually Instead of Quarterly?

Short-termism, the tendency of companies to focus on short-term profits rather than long-term goals, is a much-discussed problem in global financial markets—and many people point the finger at quarterly earnings statements. Companies spend significant time, money, and resources putting together quarterly reports, releases, and analyst calls, and executives are under pressure to deliver good news.

In a bid to refocus executives on longer horizons, the European Commission in 2013 scrapped quarterly reporting requirements in favor of semi-annual reports, and Britain has done the same. Many large companies continue to issue quarterly reports, which the United States still requires. But this past summer, US President Trump tweeted that he’d asked the Securities and Exchange Commission to study whether the US, too, should adopt semi-annual reporting rules.

But what if companies had to report just once a year? Chicago Booth’s Initiative on Global Markets asked its European panel of economic experts whether moving from quarterly to annual reports would lead executives to focus more on the long-term. About a third of the economists polled predicted that it would, more than double the amount who disagreed.

The panelists were less certain about whether the move would benefit shareholders of EU companies.