Speaking to InvestorDaily, UNSW’s Professor Peter Swan backed US President Donald Trump’s proposal, calling quarterly reports “costly” and a driver of short-termism, while RMIT’s Associate Professor My Nguyen said cutting disclosure could help long-horizon sectors like mining but risk leaving retail investors in the dark.
“Trump is doing the right thing. CEOs and boards need to focus on the long-term, not one-quarter,” Swan from the Business School of Banking and Finance said.
President Trump on Monday posted to Truth Social calling for a switch to a six-month reporting period, claiming the move would save money and allow managers to “focus properly on running their companies”.
Swan believes CEOs who do not meet quarterly targets are often unnecessarily punished.
“In recent decades, the number of listed US companies has more than halved. Both in the US and Australia, private equity is in the ascendancy. Outside directors and overregulation are destroying listed equity in both the US and Australia … This move would benefit companies and, subsequently, investors,” Swan said.
The US Securities and Exchange Commission (SEC) has required publicly traded companies to report on a quarterly basis since 1970, while the UK and EU require only half-yearly updates. Australia has always had six-monthly reporting.
However, Swan said not a great deal of attention is paid to half-year results in Australia.
“We have so called ‘continuous disclosure’. Hence in theory we do better than quarterly. The ASX and listed companies have encountered many problems with continuous disclosure and has encouraged many lawsuits,” he said.
In a note to InvestorDaily, Nguyen from RMIT said the Australian market is characterised by a strong culture of transparency, underpinned by continuous disclosure obligations enforced by ASIC and the ASX.
However, she said removing quarterly disclosure pressures could benefit Australian companies.
“Sectors like mining, resources and infrastructure, where investment horizons stretch over decades, would welcome relief from quarterly disclosure pressures. Smaller listed firms could also redirect compliance resources toward business growth,” she said.
Nguyen said the trade-offs for investors in the US switching to half-yearly reporting are complex.
“While institutional investors may have access to management through private calls and analyst briefings, retail investors would be disadvantaged. The result could be higher uncertainty and possibly more reliance on rumours or informal guidance. So, while companies may see efficiency gains, the benefits to investors are more mixed.
“Without quarterly updates, problems such as cost overruns, governance failures, or regulatory breaches may only come to light at half-year or year-end result,” she said.
Meanwhile, the University of Sydney’s Dr Buhui Qiu is not convinced the US should shift from quarterly to half-yearly.
“Evidence from the UK and Europe, where regulators have toggled between quarterly and semi-annual regimes, shows little to no improvement in long-term investment when firms report less frequently, but some loss of market information,” he told InvestorDaily.
He suggested the way to curb managerial short-termism could be by changing guidance culture and executive pay design.
“Reducing standardised report frequency raises information asymmetry. We will likely see wider spreads and higher price impact when firms scale back their quarterly disclosures, so you tend to get bigger bursts of volatility around the fewer, denser reporting dates,” Qiu said.
It’s not the first time President Trump has attempted to end the half a century-old mandate, pushing for a similar reform during his first term.
AMP chief economist Shane Oliver believes quarterly reporting is “over the top”.
“I think [Trump’s] right – and he was right in 2018,” Oliver said.
“There are greater odds of a change because more of the commissioners on the SEC have been appointed by Trump … there may not be as much pushback.”
The US switching to half-yearly reporting would likely have the biggest local impact on institutional investors, such as Australian super funds.
“Most investors, like most economists, most fund managers, prefer more information than less. I think at some degree, extra information could just result in confusion,” Oliver said.
