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President Trump asks SEC to study abolishing quarterly earnings reports

15 points by skolos 8y ago

throwawaymanbot 8y ago
How is this management efficiency? If he wants to get rid of it there must be a reason that suits him.
tonysdg 8y ago
After reading the WSJ version of this article, I can see the argument in-favor: quarterly earnings reports put more weight on hitting short-term goals over long-term investment. That's just basic human nature, I suppose. Yet flat out abolishing them seems a terrible price to pay in terms of transparency. Perhaps a middle ground, based on the size of the company in terms of revenue? Or some other (less onerous, I guess) means of reporting -- in quantifiable terms -- the health of a business each quarter?
gumby 8y ago
So what are the problems? One, as stated, is that quarterly reports turn into quarterly voting by the Stockmarket, and thus poor decision making. Another, frankly, is the work on putting them together. It doesn't seem like cutting the frequency in half will matter much: long term planning has a longer horizon than six months. Why not go the other way? Allow companies to publish financial statements monthly (with a rolling close) plus annually one month after the annual close. And as for the various material statements and representations that go along with them, let various press releases, tweets etc account for them, plus the annual formal statement (shareholder letter). IIRC Cicso famously had a "three day close" closing their books three days into the new month. Some reasonable software investment should permit many companies to do a rolling close. Those who make that investment would be permitted to stop doing quarterlies. This is a case where a more frequent cadence of lower amplitude might allow a better long term view!
- DataWorker 8y ago
  Wouldn’t that tend to encourage faster more volatile trading?
  - gumby 8y ago
    Probably not. That's what I was getting at with this sentence: > This is a case where a more frequent cadence of lower amplitude might allow a better long term view! Essentially, the quarterly cadence makes each release a big deal. More frequent releases may have slightly more volatility encouraging investors to look for longer trends. Ideally you'd have weekly closes but except for large companies that would offer all sorts of swings due to trivia like expense reports or other transients. But GAAP in theory would allow a large modern corporation to close every day. The whole point of accrual is to damp out this nonsense.

15 points by skolos 8y ago

How is this management efficiency? If he wants to get rid of it there must be a reason that suits him.

After reading the WSJ version of this article, I can see the argument in-favor: quarterly earnings reports put more weight on hitting short-term goals over long-term investment. That's just basic human nature, I suppose. Yet flat out abolishing them seems a terrible price to pay in terms of transparency. Perhaps a middle ground, based on the size of the company in terms of revenue? Or some other (less onerous, I guess) means of reporting -- in quantifiable terms -- the health of a business each quarter?

gumby 8y ago

So what are the problems? One, as stated, is that quarterly reports turn into quarterly voting by the Stockmarket, and thus poor decision making. Another, frankly, is the work on putting them together. It doesn't seem like cutting the frequency in half will matter much: long term planning has a longer horizon than six months. Why not go the other way? Allow companies to publish financial statements monthly (with a rolling close) plus annually one month after the annual close. And as for the various material statements and representations that go along with them, let various press releases, tweets etc account for them, plus the annual formal statement (shareholder letter). IIRC Cicso famously had a "three day close" closing their books three days into the new month. Some reasonable software investment should permit many companies to do a rolling close. Those who make that investment would be permitted to stop doing quarterlies. This is a case where a more frequent cadence of lower amplitude might allow a better long term view!

DataWorker 8y ago
Wouldn’t that tend to encourage faster more volatile trading?
- gumby 8y ago
  Probably not. That's what I was getting at with this sentence: > This is a case where a more frequent cadence of lower amplitude might allow a better long term view! Essentially, the quarterly cadence makes each release a big deal. More frequent releases may have slightly more volatility encouraging investors to look for longer trends. Ideally you'd have weekly closes but except for large companies that would offer all sorts of swings due to trivia like expense reports or other transients. But GAAP in theory would allow a large modern corporation to close every day. The whole point of accrual is to damp out this nonsense.