Trump Rekindles Push to Eliminate Quarterly Earnings Reports. What's Next?

Trump Proposes Semiannual Reporting for U.S. Companies

President Donald Trump has once again raised the idea of shifting from quarterly to semiannual financial reporting for U.S. companies, a move that could significantly impact investors and corporate operations. This proposal, which he first introduced during his first term in office, was recently reiterated on his Truth Social platform. Trump claimed that this change would "save money" and allow company managers to focus more on long-term strategic planning rather than short-term performance pressures.

In Europe, many companies already report financial results twice a year, though they may provide additional updates throughout the year. While Trump emphasized that this proposal is "Subject to SEC Approval," it remains unclear how seriously he will pursue this change. Analysts suggest that while the Securities and Exchange Commission (SEC) might consider the idea, the timeline for any potential shift is still uncertain.

TD Cowen analyst Jaret Seiberg believes that the SEC is likely to take the matter into consideration, especially given the current leadership under Chairman Paul Atkins, who aligns with deregulatory policies. However, Seiberg does not expect any formal proposal until at least 2026.

The transition from quarterly to semiannual reporting would not require congressional approval, as it could be implemented through an SEC vote. With Republicans holding a 3-to-1 majority on the commission, the political landscape seems favorable for such a change. However, according to Evercore ISI’s Sarah Bianchi, the process could take six to 12 months to complete, depending on how quickly the SEC moves forward.

Key questions remain about whether SEC Chairman Paul Atkins will fast-track the proposal or proceed with the standard, methodical process. Additionally, it is unclear whether Trump will actively push for this change as a top priority or give the SEC the space to operate independently.

Industry Support and Historical Context

There has been growing support for changes in financial reporting practices within the financial industry. For example, the Long-Term Stock Exchange (LTSE), a niche exchange catering to long-term investors, plans to petition the SEC to eliminate the requirement for quarterly earnings reports. The LTSE also aims to allow companies to report every six months and hopes to influence broader changes beyond its own platform.

High-profile figures like Elon Musk have criticized the quarterly earnings cycle, pointing out the pressure it places on companies like Tesla Inc. to prioritize short-term gains over long-term goals. Similarly, former PepsiCo CEO Indra Nooyi has spoken out against the system, emphasizing the need for a more sustainable approach to corporate strategy.

Decline of Publicly Traded Companies

The number of publicly traded companies in the U.S. has declined sharply over the past few decades. In 1996, there were more than 7,000 publicly listed companies, but by 2020, that number had dropped to less than 4,000. Meanwhile, the number of public companies in non-U.S. advanced economies increased from around 4,000 to 20,000 over the same period.

JPMorgan Chase & Co. CEO Jamie Dimon has frequently highlighted the diminishing role of public companies in the American financial system. In his 2023 annual letter to shareholders, he suggested that stringent reporting requirements could be one of the factors driving companies away from public markets.

Cost of Compliance

The cost of compliance with U.S. financial reporting requirements is significant. According to research from Emory University’s School of Law, public companies in the U.S. collectively spend over 15 million people-hours annually producing securities disclosures. This highlights the administrative burden associated with the current reporting system.

As the debate over financial reporting continues, the potential shift to semiannual reporting could mark a major change in how U.S. companies communicate with investors and regulators. Whether this proposal gains traction will depend on the actions of the SEC, the level of support from the business community, and the willingness of policymakers to embrace a different approach to corporate transparency.