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Should the SEC stop requiring companies to do quarterly earning reports?

ChristianKl          29 August 2015 04:00 PM


At the moment the SEQ requires publically listed companies to do quarterly earning reports. The exist for providing the shareholders with information about the company they own. Lately there's a lot of concern that companies are driven too much by the desire to optimize quarterly returns. Should the SEC stop requiring companies to do quarterly earning reports and allow them instead to provide the reports annually?



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gogog00 29 October 2015 10:23 PM
72%

"Lately there's a lot of concern that companies are driven too much by the desire to optimize quarterly returns"


The evidence of this is incredibly shaky and driven by populist grandstanding.

http://www.ifswf.org/pst/Long-Term-Investing-Part-1.pdf

http://www.bloombergview.com/articles/2015-07-27/quarterly-capitalism-and-secret-drachmas

http://www.valuewalk.com/wp-content/uploads/2014/05/horizon_RFS.pdf


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melian 2 September 2015 08:22 AM
70%

I think the main problem is that, on average, shares change owners every 7 years. This means that most shareholders are more interested in the short-term price increase for their shares than in the long-term prosperity of the company. As the result, there is a strong pressure on company directors to engage in creative accounting practices. Removing the requirement for quarterly earning reports seems unlikely to change that.


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ChristianKl 7 September 2015 09:13 AM
64%

It's a single action that wouldn't end all problems in corporate capitalism. That's not the point. The question is whether it would be a benefitial step to take or whether it wouldn't.

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DanielLC 4 September 2015 09:50 PM
63%

But why wouldn't long-term prosperity cause short-term increases? If I knew stock was going to be worth a hundred times as much in fifty years, then at an interest rate of 5% per year I'd be able to sell it for 95 times as much in 49 years, which means I could sell it for 90.25 times as much after 48 years etc. The end result is the stock jumping by a factor of 7.7 immediately. Otherwise you're expecting that the stock will rise by more than 5% in some year but for people not to buy it for that much.

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melian 5 September 2015 05:39 AM
73%

Long-term prosperity does cause short-term increases. The problem is that short-term increases are often achieved at the expense of long-term prosperity. For instance, in 1987 GM made a drastic change in its accounting practices reducing the estimated depreciation rate for its assets. On paper, this increased profits by over one billion which naturally increased its share price. However, in the long term the new accounting method meant that the company would have to pay more taxes thus reducing the real value of the companyís assets. Not surprisingly, 22 years later such methods lead the company to file for bankruptcy.

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ChristianKl 19 September 2015 04:18 AM
68%

A lot of moves that lead to long-term prosperity don't produce evidence that's publically visible. Companies do have trade secrets and are not open about all their strategic objectives years down the line.

What they have to be open about with quarterly earning reports, is numbers of how much revenue they create in a given quarter. There are choices that can increase short term revenue at the cost of long-term revenue where the effects are not apparant to the outside world but are predictable based on propertiary company information.

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is4junk 13 October 2015 09:33 AM
66%

Why not make them do the reporting more frequently? Monthly or weekly?

The public companies have been doing them quarterly since the 1934 Security Exchange Act.

Now with automation it should be easier for them to do the reporting even more often. and with more frequent
reporting they would have less incentive to optimize for the short term - imagine daily or hourly reporting.


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DanielLC 29 August 2015 08:35 PM
66%

Perhaps they should allow the stockholders to vote on if they want quarterly earning reports.


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ChristianKl 1 September 2015 09:48 AM
68%

At present a company wouldn't have a problem releasing monthly earning reports. The SEC sets a minimum. If the SEC would only require yearly reports and the majority of the shareholders want quarterly reports, monthly or biyearly reports they could vote for it. On the other hand minority shareholders who want more information couldn't get quarterly reports.

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