All the Reasons Trump Would Be Wrong to Ditch Quarterly Earnings

Companies can happily invest for the long run while reporting quarterly. Just look at today’s economy.

By James Mackintosh of The WSJ. Excerpts:

"For proof, just look at today’s economy. Big Tech companies are set to invest almost $400 billion this year in long-term artificial-intelligence projects, and quarterly reporting has been no barrier. Big Oil explores and builds multibillion-dollar wells and refineries while being publicly listed. And corporate investment overall in the U.S., at 10% of GDP last year, is higher than any time before quarterly reporting was introduced in 1970."

"No need to take my word for it. The U.K. offered a perfect case study to examine quarterly reporting when it made it optional in 2014. There was no effect on investment or research spending for companies that switched to half-yearly reporting, suggesting they didn’t start to think more about the long term.

“That really undercuts one of the main arguments against quarterly reporting,” says MIT senior lecturer and former fund-management executive Robert Pozen, who, together with two colleagues, studied the U.K. change. 

Indeed, if quarterly reporting were such a huge barrier to companies, it’s odd that the U.S. market is thriving, while London is struggling to attract new listings or even hold on to existing ones."

"The problem is much wider: Chinese listed-company profit margins are below 8%, while in the U.S. they are approaching 14%. State-directed overinvestment is a significant part of the problem."