Market Brief: Examining the SEC’s Semiannual Reporting Rule as a Governance Proposal

The Securities and Exchange Commission’s proposal¹ to make quarterly reporting optional for public companies has largely been framed² as a debate about deregulation, issuer cost reductions and disclosure frequency. But the proposal is not merely about whether companies should report financial results every three months or every six months. It is about how public companies balance transparency with long-term strategy, and how investors exercise fiduciary responsibilities in increasingly complex markets.

It is about corporate governance and stewardship, illustrating an underlying debate between accountability and trust, comparability and relevance.

One view holds that quarterly reporting contributes to an excessive focus on short-term financial performance that undermines long-term stewardship, distorts management incentives, and discourages strategic investment.³ Another view argues that less frequent reporting could limit investors’ ability to monitor risk and pursue opportunity in real time.⁴ This article provides a brief overview of the debate landscape by contrasting these perspectives and exploring their governance and stewardship implications.

The Governance Case for Semiannual Reporting: Against Short-Termism

Critics of quarterly reporting argue that the current framework encourages excessive focus on near-term earnings⁵ and a short-term outlook more broadly.⁶

While many institutional investors take a long view, public companies operate in an environment where the market reacts quickly to new information. This can create pressure to manage results quarter by quarter, even when those decisions conflict with longer-term strategic objectives. One way to meet an impending target is to delay investments, reduce research and development spending, announce layoffs or defer hiring, or limit operational transformation initiatives.

By this logic, reducing mandatory reporting frequency could allow management teams and boards to focus more effectively on long-term strategy, capital allocation, and resilience.⁷ The proposal effectively functions as a governance reform aimed at changing incentives inside the boardroom and executive suite.

The Governance Case for Quarterly Reporting: Transparency and Accountability

At the same time, good governance relies on transparency. Quarterly reports are not merely compliance documents. They provide investors with audited information to evaluate management credibility, monitor operational performance, assess risk exposure, and engage with boards on emerging issues.

Without the existing quarterly disclosure requirements, investors would have fewer regular opportunities to evaluate whether boards are responding effectively to changing circumstances. By reducing visibility into how companies manage these evolving risks, less frequent reporting could potentially exacerbate share price volatility, particularly in periods of market stress when reliable information can help reinforce investor confidence and reduce uncertainty. Moreover, lowering reporting requirements while certain market participants continue receiving information through private channels could lead to increased concerns about information asymmetry, and potentially insider trading.

Trade-offs in Comparability and Relevance

From a stewardship perspective, another way to look at the proposal is through the lens of comparability and relevance.

Quarterly earnings reporting provides broad comparability across thousands of companies through the aggregation of consistent data. This is crucial for retail investors and others trading at a distance⁸ who lack access to corporate management, e.g., via engagement meetings, analyst calls and investor conferences. And even well-resourced institutions that regularly engage with portfolio companies rely on timely access to vetted information in order to evaluate whether boards are responding effectively.

The trade-off to comparability is relevance. A snapshot of standardized financials, taken like clockwork every quarter, may or may not provide actionable information about how a given company is performing at this point in its specific business cycle — and forcing all companies to fit into a single framework, on a short-term cadence, could potentially influence their behavior in ways that undermine long-term performance.

Reporting Frequency in International Markets

Other major international markets operate without mandatory quarterly reporting requirements. The EU⁹ and UK¹⁰ moved from quarterly to half-yearly reporting requirements over a decade ago, in response to concerns over short-termism and capital market competitiveness. Japan eliminated quarterly reporting requirements in 2024,¹¹ shifting to exchange-based earnings statements. Notably, many large companies in these markets continue to voluntarily report on a quarterly basis.¹²

One view is that this demonstrates how the practical impact of lowered requirements could be less disruptive than skeptics fear. The U.S. could maintain strong shareholder protections while reducing compliance burdens. In theory, the absence of formal reporting requirements may actually serve to deepen the level of trust and understanding underpinning stewardship relationships by forcing investors to talk to companies more often.

Another view is that these other markets aren’t directly comparable to the United States, where weaker stewardship ties and the absence of uniform best practices makes transparency more central to the overall governance landscape. From this perspective, whereas corporate governance standards in many other developed markets have been homogenized amid strong relationships between various stakeholders, the U.S. remains a relatively wide-open field. Established companies routinely maintain practices that diverge from investor expectations, such as combined chair/CEOs and plurality voting, and/or decline to take action in response to minority shareholder opposition. Rather than competing for capital based on the strength of its governance best practices, the U.S. has historically distinguished itself through relatively robust disclosure standards, high liquidity, and strong investor confidence in market transparency. By this logic, reducing mandatory reporting frequency could arguably risk weakening one of the specific characteristics that makes U.S. equities markets attractive to investors.

A Debate About the Role of Public Companies

The SEC’s proposal represents more than a technical disclosure reform. Moving from a quarterly to a semiannual reporting structure could reshape the relationship between boards, management teams, investors and markets.

Reducing mandatory reporting frequency could shift investment stewardship practices toward a more engagement-centric model where investors place greater emphasis on long-term relationships in assessing portfolio companies rather than standardized reporting — potentially widening the gap between companies based on the robustness of their outreach infrastructures, and between investors based on the sophistication of their stewardship programs.

The proposal could also reshape broader market behavior. Public markets are built on the assumption that broad, timely disclosure promotes trust, liquidity and efficient price discovery. If reporting becomes less frequent, markets may rely more heavily on voluntary disclosures, earnings calls, analyst access, alternative data and informal signaling from management teams. Forced to rely on information that is not subject to external assurance, or simply less information, investors could respond to a reduction in market transparency by demanding higher risk premiums, trading less actively, or favoring issuers that maintain more transparent communication practices.

The proposal therefore returns to the foundational governance question: should public markets primarily optimize for transparency, widespread comparability and continuous accountability, or should they create more space for long-term strategic management at the expense of frequent standardized reporting? Whether the removal of quarterly disclosure requirements ultimately strengthens or weakens U.S. corporate governance will likely depend less on the reporting calendar itself and more on how companies, investors, and regulators view this question, and how they adapt to the incentives created by the new framework.

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