Quarterly and semi -annual earnings: Trump revives a global debate

Copyright © HT Digital Streams Limit all rights reserved. Quarterly earnings reports are not just about financial numbers. They come up with investor calls where managing a company is reading the economy, competitive threats, regulatory changes, etc. Share, but they also consume significant management time and resources, which increases the compliance burden for companies. (AI-generated image) Summary’s call to delete quarterly results has reopened a long-term debate on transparency to short-term manureism. Mint explains what the shift to semi -annual reporting can mean for companies, investors and Indian markets. US President Donald Trump has reported another debate-must-have business every quarter revenue, or that it is semi-annual revelations to promote a long-term focus. The question falls on the balance between transparency and the burden of compliance, a trade -in that regulators and investors around the world struggle with. Mint looks at this thorny issue, and aspects that are more relevant to Indian capital markets. What did Trump suggest? In a truth group, Trump argued that companies should no longer be forced to report numbers every three months as it was an expensive and time -consuming ritual. ‘Subject to SEC approval, companies and corporations should no longer be forced to report a quarterly’ report ‘(quarterly reporting!), But rather to report on a’ six (6) monthly basis’, he posted. ‘It will save money and allow managers to focus on the proper management of their businesses. Have you ever heard the statement that: ‘China has a 50 to 100 year view on running a company while running our businesses on a quarterly basis ??? Not good !!! “In response to the Nudge, a spokesperson for the US Securities and Exchange Commission (SEC) said it prioritized this proposal to” further eliminate unnecessary regulatory liabilities on companies “. This is not the first time Trump has hampered this topic. In 2018, during his first term as president, he asked the US capital markets regulator to study transition to a 6-month reporting cycle for companies. The SEC requested public comment on this, but the rules were eventually left unchanged. In 1970, the regulator introduced compulsory quarterly reporting as part of a decades-long attempt to increase market transparency in the aftermath of the ‘1929 accident’ in the US. Are there markets where businesses follow a semi -annual reporting schedule? Yes, there are some. The UK removed its quarterly reporting requirement in November 2014. In 2013, the EU changed to remove the compulsory quarterly reporting requirement for issuers on regulated markets. Only semi -annual and annual reports are legally needed. However, many companies are publishing more frequent information to meet investor expectations. Large markets such as Hong Kong, Singapore and Australia also require companies to prepare semi -annual financial statements, while quarterly reporting is voluntary. Earlier this year, the Sovereign Wealth Fund of Norway, which is the world’s largest with assets of more than $ 1.7 trillion, asked to end an end to the compulsory quarterly reporting to avoid short-term decision making. What are the most important arguments against quarterly reporting? The biggest grouse is that it encourages short -term makers, and putting improper pressure on running a business to achieve targets in the short term to ‘Mr Market’ rather than focusing on long -term strategy and investment. Critics argue that the cycle of reporting numbers and answering questions of the press and analysts often leads to ‘earnings management’ every three months and discourages the fat, strategic bets where the immediate payout is uncertain. In addition, the preparation and audit of quarterly reports consumes significant management time and resources, increasing the compliance burden for companies. In a joint opinion article in 2018, Warren Buffett, chairman of Berkshire Hathaway, and JPMorgan CEO Jamie Dimon argued that the pressure to meet the short-term earnings estimates contributed to a decline in the number of public enterprises in the US over two decades. “Short -term capital markets have discouraged companies with a long -term view of depriving the economy of innovation and opportunities,” they wrote. However, they added that they were not opposed to the timely reporting of corporate performance, but that this information should be provided at a timeline deemed suitable for the needs of each specific business and its investors. Do quarterly reporting have any benefits? Yes, quarterly reporting offers significant benefits and protection for investors and markets. Regular corporate updates increase transparency and prevent markets from becoming opaque, ensuring investors can make informed decisions. Some experts have pointed out that venture capital and private equity investors demand quarterly or even monthly updates from their portfolio companies, and that management teams themselves have a monthly reporting structure to detect performance and signs of tension. And that shareholders, who are the ultimate owners of companies, deserve the same level of timely information to detect the performance of their firms. Several market participants also argued that even a 6 -month reporting cycle could be considered in short term, as large investments could take several years to produce results. The stock market performance also indicates that less frequent reporting is not automatically translated into better outcomes. Despite the supposed burden of quarterly filing, Wall Street and US businesses have continuously outperformed their European counterparts, where semi -annual reporting is the norm. If quarterly the markets really push in short-termism, as many argue, the startups that make loss can never take the IPO route or recommend valuations with sky height. Yet many such firms, including in India, are at expensive multiples despite losses, which show that markets clearly have prices in potential and not just in the short -term gains. What are the pros and cons of a longer reporting cycle in the Indian context? The Securities and Exchange Board of India introduced the requirement of quarterly disclosures in 1999, and it came into effect from 2000, making it compulsory for listed companies to publish un -audited financial results every three months. Currently, the framework is controlled by the listing obligations and disclosure requirements, including companies to submit quarterly results within 45 days of a quarter end, while the results of the final quarter and audited annual accounts must be announced within 60 days of the end of a financial year. Sebi has so far shown no tendency to review the quarterly reporting framework. But if one represents a shift to a longer cycle, experts fear that fewer revelations can make markets more opaque. Another fear is that if the gaps in the information span six months, the knowledge of insider would become valuable, which harms ordinary investors. Quarterly results are also not just about financial numbers. They come with investor calls where management is reading about the economy, competitive threats, technological shifts, regulatory changes, etc. Share, and form an important source of information for investors and other stakeholders. That said, smaller businesses can find relief in a longer reporting cycle. Reduced compliance burden can free time and resources to focus on their main business, although even then corporate management standards will be maintained at a high level to protect investor confidence and market confidence. Catch all the corporate news and updates on live currency. Download the Mint News app to get daily market updates and live business news. More Topics #Mint-Explainer #Primer Read Next Story