WASHINGTON: US President Donald Trump has asked stock market regulators to look into ending the requirement for businesses to issue quarterly earnings reports.
Asking the Securities and Exchange Commission to move to twice-yearly reporting could help create jobs, Trump said on Twitter on Friday.
Some market commentators believe the pressure to meet targets every 90 days causes executives to make decisions based on short-term thinking to satisfy the market at the expense of the long-term viability of their companies.
One criticism is that if companies are striving to report profit gains every quarter, they are more likely to buy back shares and cut costs than invest in their businesses.
There are also tremendous expenses associated with preparing quarterly and annual reports.
Earlier this year, billionaire investor Warren Buffett and Jamie Dimon, the head of JPMorgan Chase, urged companies to stop issuing quarterly earnings guidance. But moving away from reporting earnings every three months would be a much more dramatic change that would almost certainly trigger resistance from shareholders who want transparency from the companies they invest in.
Trump believes he has the support of some executives for a change.
“In speaking with some of the world’s top business leaders I asked what it is that would make business (jobs) even better in the US. ‘Stop quarterly reporting & go to a six-month system,’ said one. That would allow greater flexibility & save money,” he tweeted.
“I have asked the SEC to study!”
The SEC was created in 1934 in the midst of the Great Depression and requires publicly-traded companies to issue quarterly and annual earnings reports to keep the public informed on their operations and financial condition.
The law that created the SEC requires public reports, but the agency has some leeway to interpret the law in setting regulations.
The SEC consists of five commissioners appointed by the president, although there currently are only four in place, three named by Trump. No more than three can be from any one party.