Trump Proposes Semiannual Reporting for US Companies: Cost Savings or Reduced Transparency?

Trump Advocates for Changing US Corporate Financial Reporting System

Former US President Donald Trump has called for US companies to stop submitting quarterly financial reports and instead report every six months. Trump justified this proposal by arguing that it would save companies money and help their managements focus on long-term growth rather than quarterly results.

Trump compared the US quarterly reporting system to China's alleged "50- to 100-year corporate management perspective," claiming that the US system "hurts US competitiveness."

Under current Securities and Exchange Commission (SEC) regulations, most publicly traded companies are required to file a quarterly "10-Q report" and an annual "10-K report."

Trump's and Supporters' Justifications

Trump emphasized that this change, if approved by the SEC, would save money and enable managers to focus on properly running companies. He criticized the focus on quarterly performance, saying: "Have you ever heard the saying 'China has a 50- to 100-year vision for corporate management, while we run companies on a quarterly basis?' That's bad!"

Trump agrees with many business leaders, such as Warren Buffett and Elon Musk, who have criticized the quarterly reporting system, arguing that it forces companies to focus excessively on short-term results and neglect long-term investments.

Concerns and Criticisms

However, critics fear that this proposal could reduce information transparency. Former SEC Chair Mary Schapiro has pointed out that "quarterly reports are a key tool for investors to monitor corporate operations, and reducing the frequency of disclosure could exacerbate information asymmetry."

Some institutional investors have also expressed concern that semiannual reports could lead to increased market volatility, as investors would need to absorb information over a longer period.

Potential Impact and Challenges

If Trump's proposal is implemented, the US disclosure system would be more aligned with practices in the European Union and the United Kingdom, where companies are not required to file quarterly reports mandatorily.

Industry estimates suggest that US companies spend an average of "$1.2 million" annually preparing 10-Q quarterly reports, including audit, legal, and internal management costs. Switching to semiannual reports could save approximately 30% - 50% of compliance expenses.

However, approval of this proposal requires SEC approval, and the SEC is expected to face challenges in balancing easing the burden on companies and protecting investors' interests. This proposal is also likely to spark partisan divisions, and its implementation may take at least one or two years.

The Debate Around Short-Termism

The debate over the merits of quarterly versus semi-annual reporting highlights a larger discussion about short-termism in capital markets. Some argue that the relentless pressure to meet quarterly earnings targets can lead companies to prioritize immediate gains over long-term strategic investments, potentially hindering innovation and sustainable growth. Others maintain that quarterly reporting provides crucial transparency and accountability, allowing investors to make informed decisions and hold management accountable for their performance.