Quarterly or No? How to Argue About the Frequency of Financial Reports.
Sep 19, 2025 14:39:00 -0400 | #Regulation #Streetwise
Close up of calendar. (Dreamstime)
Quarterly or twice a year? If you find your friends suddenly arguing about the frequency of financial reporting for listed companies, and you feel left out for lacking strong opinions on the matter, I can help. Here’s a quick guide to choosing sides. Don’t be nervous: I’m pretty sure the stakes on this one are low. But that’s no reason not to debate it as hotly as you would politics, or subtitles versus dubbing, or whether it’s acceptable to sleep in socks.
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Start with the semiannualists, who got a big boost this past week when President Trump posted his support on his Truth Social media site. Permitting public U.S. companies to report financial results every six months instead of quarterly “will save money and allow managers to focus on properly running their companies,” he wrote. “Did you ever hear the statement that ‘China has a 50- to 100-year view on the management of a company, whereas we run our companies on a quarterly basis???’ Not good!!!”
Formal standards for financial reporting by public companies date to 1934 and the creation of the Securities and Exchange Commission during a deep depression set off by a stock market crash. In 1970, when another market rout hit bottom, the SEC switched to quarterly reporting. Listed companies now file three unaudited 10-Q reports a year with financial tables, a discussion of results by management, and some key disclosures, followed by an audited and more comprehensive 10-K.
When the president made a similar argument for semiannual reporting in 2018, the SEC solicited public comment but did nothing. The regulator has a new head since April who is known for crypto-friendliness and deregulation, and it now says it’s prioritizing the president’s request.
Semiannual reporting could indeed be a money-saver. APQC, a business benchmarking consultant, puts the median cost of company financial reporting at 40 cents per $1,000 of revenue. For an up-and-comer booking $100 million a year, that’s $40,000. Nasdaq, the stock exchange, is on the side of the semiannualists. It makes part of its money from stock listings, whose number in the U.S. has fallen from more than 8,000 in 1997 to fewer than 4,000 now.
This is a decent argument if you choose the semiannualist side—that costs and regulations are gobbling up the stock market. Just avoid mentioning that private equity is chowing down, too. Are regulations chasing companies to private equity, or is private equity’s swelling supply of growth capital luring them from tapping public markets? Whichever the case, last month the president directed the Labor Department to explore letting private equity tap 401(k) cash. By my calculations, that should leave two dozen stocks by 2050. I plan to stay diversified with an S&P 9 fund.
Also play up short-termism. If companies are obsessed with hitting their quarterly numbers, how can they possibly invest for the long term? Never mind that U.S. companies plowed 37% of cash flow into research, development, and capital expenditures over the past five years, versus 17% for their counterparts in Europe, where twice-a-year reporting is more common, according to Goldman Sachs.
My top tip for semiannualists is to make frequent use of the term “red tape.” I find that no one speaks favorably about it—even tape manufacturers seem mildly embarrassed.
If you choose Team Quarterly, on the other hand, you benefit from incumbent status. Reducing investor information is a difficult sell for the other side. What would have happened if Enron had only reported every six months? Pretty much the same thing? Well, that’s not the point.
If you choose this side, throw in the term “information asymmetry” a lot. It vaguely means that if companies don’t report results often enough, then well-placed investors will end up knowing more than the rest of us. Although technically, if we’re talking about illegal asymmetries, something called Reg FD forbids companies from creating them, no matter the frequency of reporting. And if we’re talking about legal ones, the ultimate asymmetry is knowing how badly index funds have beaten stockpickers.
Another argument for quarterly reporting is that switching to semiannual could lead to bigger earnings-day surprises and more volatility, thereby eroding public confidence. If you make this case, it’s important to keep a straight face. Don’t crack up over analysts managing their estimates down to easily beatable levels each quarter—like last quarter, when Wall Street predicted S&P 500 earnings would grow 4.8%, and the actual number was 12%. Remember: Undermining the confidence of Reddit bros YOLO-ing into the latest microcap moondust miner to convert to a business model of hoarding DoodyCoin is no laughing matter.
Note that a Brown University study on reporting frequency concluded that a split system is best, whereby small companies would report semiannually, and the rest, quarterly. I find sensible compromise off-putting, but to each their own.
No matter which position wins out, don’t expect much to change. There are numerous studies of reporting changes in select overseas markets, but findings on how company performance was affected are contradictory. Comparing the U.S. with Europe invites hidden variables; has the U.S. outperformed because of its quarterly reporting, or because it has a better mix of companies? But Europe itself, where the mix of semiannual and quarterly reporters is about 50/50, and has been for a decade, offers a natural experiment.
Goldman finds that the two groups are similar in performance and popularity. Europe’s quarterly reporters earn a median estimated return on equity of 14% and trade at 14.4 times projected earnings. Its semiannual ones earn 15% and trade at 14.8 times earnings.
Where’s the big payoff? We might have to move straight to no financial reporting, with investment decisions based on new metrics like price/mojo and net swagger. Information asymmetries would rise, but think of the long-termism.
Write to Jack Hough at jack.hough@barrons.com. Follow him on X and subscribe to his Barron’s Streetwise podcast.