Key Takeaways

  • A survey shows that 62% of financial analysts and portfolio managers oppose replacing quarterly reports with semiannual reports, although 63% believe the benefits of 10-Q filings "outweigh the costs." The survey was released this month by the CFA Institute, which represents chartered financial analysts.
  • Of the 2,500 financial analysts and portfolio managers surveyed, about 70% oppose giving companies the option to decide their own financial reporting frequency—a flexibility that the U.S. Securities and Exchange Commission (SEC) formally proposed last month.
  • "Global investors—not just those in the U.S.—still view quarterly reporting as a fundamental feature of transparent, efficient, and credible capital markets," said Matthew Winters, senior director of corporate disclosure and information advocacy at the CFA Institute, in a press release.

Deep Dive

The support for quarterly reporting among analysts and portfolio managers runs counter to a new plan proposed by the SEC last month. The plan would allow public companies to file semiannual reports using a new Form 10-S instead of quarterly reports (10-Q filings). SEC Chairman Paul Atkins said the plan is part of the Trump administration's "Make IPOs Great Again" initiative, aimed at reducing rigidity in federal reporting standards and encouraging companies to go public and stay public. Last year, President Donald Trump argued that the new rules could save companies costs and allow management to focus on "running their companies properly."

However, the CFA Institute report notes that there is little evidence that investors' demand for timely, comparable, and widely available information—such as that provided by quarterly reports—has diminished since it was first implemented in 1970. The report states that quarterly reporting supports comparability among companies, equal access to information, analyst coverage, market liquidity, investor confidence, and efficient capital allocation—features associated with investors' perception of well-functioning capital markets.

The report emphasizes: "Removing such regulation is like removing a load-bearing wall, which could cause significant damage to the 'house' supported by it—namely, the U.S. capital markets."

The survey also found some interest in relaxing reporting requirements. 82% of respondents said that if semiannual reporting became mandatory, they would support an SEC rule allowing voluntary quarterly filings. But only 32% of respondents expect that companies would continue to file quarterly reports if they became optional.

Regarding changes to reporting formats, 78% of respondents said they would not want to give up the 10-Q filing requirement if quarterly reporting became voluntary. However, 52% of respondents agreed that if semiannual reporting became mandatory, the SEC should adopt the new Form 10-S.

Half of respondents said that any reduction in reporting frequency should require broader disclosures in interim reports to compensate for the longer reporting intervals. The report shows that investors are primarily concerned that a six-month reporting interval could be too long in the current market and could push up capital costs, exacerbate stock price volatility, and create information asymmetry.

Investors surveyed also noted that a semiannual reporting framework could complicate comparability among companies, reduce dividend frequency, and increase the likelihood of unequal access to company information. Respondents believe that a reduction in reporting frequency would not prompt companies or investors to make decisions based on a longer-term future perspective. Instead, 85% of respondents said that management incentives and compensation structures are the primary drivers of long-term decision-making.

The survey was conducted in January.