US SEC preparing to scrap quarterly reporting requirement

Most large companies will continue quarterly reporting because institutional investors will not accept anything else. For a company with market cap of $500m spending $1-2m yearly on quarterly audits is non-trivial. For a company that’s $5b and up that’s not much at all.

This is also not a done deal and large pension funds will oppose this hard during the public comment portion of this process.

> And it’s not just execs, but the whole corporate machinery that takes 3–6 weeks after quarter end to churn out reports.

Release early, release often.

If you want corporate machinery to run more smoothly with less effort, force it to operate more frequently not less: when TLS certs had 2-3 year lifespans there was all sorts of manual methods that people forgot how to do; then it was maximum one year. We then got free certs from LE (using ACME), but they were 90 days, so that made automation much more necessary.

Now with certs from public CAs having a max time of 47 days soon (not that I'm necessarily a fan) automation is all but a must.

So if you want less onerous effort on corporate reporting, your workflows and processes need to be much more automated: that's one of the reason why computers were invented after-all, to make computations faster.

And one way to force automation is to insist on more frequent reporting, not less; Barry Ritholtz:

> This is exactly backward: More frequent reporting makes the data less significant. In the real world, human behavior emphasizes what occurs less often—meaning doing something less frequently gives it an even greater significance than something that becomes routine or common.

> That is the difference between a New Year’s Eve celebration and a married couple’s weekly date night.

> Twice-a-year earnings reporting will make the event so momentous, with such focus on it, that any company that misses analysts’ forecasts will find their stock price shellacked. The twice-yearly focus on making the per-share number will become overwhelmingly intense.

* https://www.fa-mag.com/news/reporting-profits-daily-would-en...

Move from quarter / every-3-months to monthly reporting: companies will be forced to automate their "corporate machinery". And each report will be much less 'momentous' because the time between samples will be much less.

Hard to disentangle that from quarterly being the US standard, what with it being the most robust capital markets and nexus of major financial transactions.

There's also just a mathematical way to look at volatility here, which is that if you look at (say) the average monthly result as a statistic for the reporting period, longer reporting periods have lower variance than shorter reporting periods.

It's something of a diversification benefit - when you're able to smooth over months, as long as they're not all perfectly correlated (your shock just keeps hitting over and over and you can't stop it) - your results will have lower variance once normalized for elapsed time.

What I can't speak to is whether this is a benefit to economic stability. Say an industry is shifting rapidly in a certain direction. Companies less able to adapt would be less quickly "punished" for that lack of adaptation.

The question is whether that adaptation curve is "a company may need extra time and upfront investment in transformation, but can get back on the curve, so giving them grace helps to stabilize jobs and markets..." vs. "a company that falls off the curve will continue to fall behind, so faster reporting incentivizes companies to innovate and not get into an irrecoverable state that destroys value."

And I think this question varies so widely between situations that it's difficult to standardize. Perhaps economists have looked at this more thoughtfully. Either way, this is an incredibly significant change - how so is a much more difficult question.

Yes, reporting should be a non event. This move will encourage bad behavior imo