Policymakers’ move toward semi-annual reporting would reshape how investment professionals make and measure decisions.
By Clare Flynn Levy
Clare Flynn Levy is CEO & Founder of Essentia Analytics. Prior to setting up Essentia, she spent ten years as a fund manager, in both active equity (running over $1B of pension funds for Deutsche Asset Management), and hedge (as founder and CIO of Avocet Capital Management, a specialist tech fund manager).
The question of whether quarterly earnings reporting promotes or undermines long-term value creation is back on the table. With U.S. policymakers once again considering a shift to semi-annual reporting, it’s worth asking: what would such a change really mean?
The argument is simple enough: quarterly disclosure causes public companies to fixate on short-term results, which actually destroys value. McKinsey research1 shows that companies that focus on meeting short-term earnings targets are not only half as likely as their peers to achieve strong organic revenue growth, but are also 27% less likely to generate higher returns on invested capital (ROIC). If we truly want the leaders of our public companies to create long term value, why not unshackle them from the tyranny of the 90-day clock?
As someone who spends her days distilling useful insights from data, my gut reaction to the very concept of scrapping quarterly earnings is that reducing transparency is a step backward. Quarterly reporting, for all its flaws, is one of the few structured feedback mechanisms available to public investors. It provides an anchor for accountability – a chance to recalibrate expectations, adjust hypotheses, and re-examine assumptions.
Eliminate that rhythm, and you risk elongating the feedback cycle, dulling the industry’s collective learning mechanism. At Essentia, our data show that investors’ decision-making quality improves most when feedback is timely, structured, and specific – exactly the kind that quarterly reporting provides.
But having also been a portfolio manager in the UK back in the days when companies only reported twice a year, I recall first hand how much more enjoyable fundamental investing was back then. We really did think longer term – and there was a lot less admin for everyone involved – so I can certainly appreciate the argument for the change.
Winners, Losers, and Unintended Consequences
Moving from quarterly to semi-annual earnings reports would be a massive behavioral intervention – one designed to reduce short-termism, but that would inevitably have a raft of consequences, intended and otherwise.
It’s worth keeping in mind that to the SEC, the Fed and other monitors of systemic risk, the elimination of quarterly earnings would mean a 50% reduction in a data source upon which they rely heavily. Less frequent corporate data would mean a slower feedback loop – and potentially result in slower detection of emerging risks. That is a dangerous dynamic in an era of index funds, algorithmic trading and rapid capital movement.
Less frequent corporate data would mean a slower feedback loop – and potentially result in slower detection of emerging risks. That is a dangerous dynamic in an era of index funds, algorithmic trading and rapid capital movement.
But it’s hard to imagine company management being anything other than thrilled by the idea of less frequent public reporting. It would feel like a windfall to corporate decision-makers who want nothing more than to be able to focus on long-term strategy, rather than on managing the share price from quarter to quarter. It might even help to revive the ailing IPO market, where today, the reporting burden and energy suck that go with quarterly earnings is a major reason not to go public.
Corporate governance advocates would argue (and I would agree) that the reduction in transparency increases the risk of poor management – or even malfeasance – going unnoticed. That said, it seems to me that with the infrastructure already in place for quarterly internal reporting, there’s no reason to believe companies with management acting in good faith would take their eye off the governance ball – they just wouldn’t have the burden of reporting it publicly every three months.
Perhaps the biggest winner from a lengthening of the cadence of earnings reports would be the fundamental active fund management industry. Less frequent public information means more room for alpha generation: more space for expertise to make a difference, whether that expertise comes in the form of a human, a computer or, increasingly, a mix of both.
But what about those quant and systematic strategies that are dependent upon a continuous flow of reported fundamentals to recalibrate factor exposures, forecast risk, and validate machine-learning inputs? No bueno. However, if they’re smart, they’re already running scenarios on the problem.
I imagine alternative data providers would see an acceleration in demand as everyone looks to redeploy the money they were spending dealing with earnings on data to illuminate the darkness left by the absence of those earnings. But anyone whose product relies on frequent disclosures to evaluate governance, compensation alignment, and ESG progress, would likely suffer.
It’s less obvious to me whether the sell side would be a net winner or loser. On the one hand, so much of equity research, sales and corporate broking activity is anchored around ‘earnings season’ – and if there’s no event, there’s no reason to trade. Halving the frequency of formal results would mean half the opportunities to publish notes, host webinars, and capture trading attention. So that’s not good.
Likewise, the financial media would lose a key driver of readership and engagement. A slower cadence would shift narrative power from reported data to speculation, potentially diminishing the accountability of both journalists and analysts. Also not helpful.
But could fewer public earnings calls save the jobs of equity research analysts? The threat of AI to junior analysts probably doesn’t go away, but the expertise and resource that exists within the population of seasoned sell-side analysts suddenly becomes more valuable. Knowing what questions to ask and what data to analyse between the official earnings announcements is an experienced analyst’s stock and trade – this could make the rest of us appreciate it again.
Retail investors would be the most obvious losers from a move away from quarterly earnings, in my mind. What we’re talking about is a ‘de-democratization’ of equity investing, in a way. Individual investors, who have access to more tradeable products via more platforms – more opportunities to lose their money – than ever, would suddenly be denied what used to be free and easily accessible information, leaving them susceptible to behavioral bias galore. I wouldn’t be surprised, in those circumstances, to see an uptick in meme stock shenanigans.
In a similar vein, I imagine it would be bad news for the passive investment fund ecosystem, which relies heavily on frequent, standardized disclosures to ensure index accuracy and benchmark integrity. Less frequent reporting could introduce staleness risk into index composition and weighting, particularly in volatile markets, increasing tracking error. Reduced transparency would make passive investing riskier, undermining one of its core selling points.
Ultimately, the debate over quarterly versus semi-annual reporting isn’t just about disclosure cadence – it’s about feedback loops, incentives, and behavior. Whether in markets or in individual portfolios, the rhythm of information release shapes how decisions are made, how risk is managed, and how attention is allocated. If we slow that rhythm, we may trade some transparency for depth of thought, some reactivity for reflection.
The key, as ever, will be ensuring that the investors, allocators, and managers who remain active in these markets use whatever feedback they have – quarterly, semi-annual, or otherwise – to keep improving their decision-making discipline. Because in the end, it’s not the frequency of the data that matters most, but what we do with it.
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👉 Comments? We have opened up a discussion thread about this on LinkedIn, and we’d love to hear your thoughts!
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1 McKinsey & Company and FCLTGlobal, Corporate Long-Term Behaviors: How CEOs and Boards Drive Sustained Value Creation (October 2020), p. 36.
