U.S. President Donald Trump on Friday said meetings with corporate executives had prompted him to ask the U.S. Securities and Exchange Commission (SEC) to study letting public companies file financial reports every six months instead of every quarter.
Many corporate executives have complained for years that such requirements are a time-consuming, costly distraction that leads them to focus on short-term profits rather than the long-term health of their companies. But quarterly reports on results are distinct from the so-called earnings guidance that company executives provide as a forecast. Please read our before commenting. That can pressure executives to engage in reckless practices to hit quarterly targets or even to manipulate earnings reports. "Stop quarterly reporting & go to a six month system", said one.
Indeed, corporate stocks are known to see sharp gains and falls on the heels of quarterly earnings releases that beat or miss forecasts - and market watchers have often said investors' quick reactions are unwarranted or ill-advised.
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Trump later told reporters the idea was especially urged on him by Indra Nooyi, CEO of PepsiCo, who is stepping down in October. The most recent data from the United Kingdom shows that only 57 of the companies in the benchmark FTSE 100 index were still issuing quarterly reports as of September 2017, according to the Investment Association.
Publicly traded companies must send investors both quarterly and annual statements.
In a report published by the US Treasury past year, the administration outlined policies it hoped would revitalize listings - but did not go as far as suggesting quarterly reporting requirements be scrapped. "And so they don't do it, because the definition of being a successful business is narrowed to what your quarterly earnings reports are". That was the argument made by Jamie Dimon, the chief executive of JPMorgan Chase, and investor Warren E. Buffett in a widely shared op-ed published by the Wall Street Journal in June.
The U.S. Chamber of Commerce and other lobbying groups have blamed compliance burdens for preventing more companies from selling shares. Visit MarketWatch.com for more information on this news.
On the other side are many investors who say frequent insight into the financial performance of corporations is critical to their own decision-making and financial security.