TheChek News Flow

Donald Trump is possibly the least likely person to make a case against oversharing. But in a social media post this year, the US tweeter in chief did just that when he questioned the need for quarterly reporting.

These pesky releases are expensive to produce and, some argue, incentivise chief executives to do whatever necessary to flatter quarterly earnings. Annoying, when all they really want to do is focus on long-term strategy. Not so fast. Both chief executives and investors are guilty of short-term thinking. But it is less clear that filing fewer reports would encourage them to extend their horizons.

For sure, quarterly reports have become less popular. A European Commission directive in 2013 relaxed the requirement for companies in the EU to file every three months. The UK soon followed suit. Indeed, the number of FTSE 100 companies producing quarterly reports fell from 70 in 2016 to 57 last year.

Skipping the quarterly release removed the psychological pressure of trying to please the market. The elaborate theatre of delivering and explaining a report to analysts and investors also went away. Those that still have quarterlies operate in global markets — or have a US listing — and feel compelled to do so.

But does switching from three months to six months promote long-term thinking? Research by the CFA Institute on the UK experience suggested that the frequency of a company’s reports does not materially affect its level of corporate investment.

To promote decision making for the long term, say three to five years, an extra three months will not make that much difference. So where do you stop? One year? Two years? A longer window between reports also allows for rumours to spiral, and might create the conditions for insider trading. Then again, it favours investors with the wherewithal to do their own research.

If the goal is to combat short-termism, then strengthen the links between remuneration and long-term performance.