Trump ignites Wall Street debate with his tweet on earnings

Trump calls for study on ending to quarterly earnings reports

President Donald Trump asked the U.S. Securities and Exchange Commission (SEC) to look into the possibility of companies filing half-year earnings report as opposed to the current quarterly earnings reports they file.

In a Twitter post Friday, Trump wrote: "In speaking with some of the world's top business leaders I asked what it is that would make business (jobs) even better in the U.S. 'Stop quarterly reporting & go to a six month system, ' said one".

"I'd like to see twice, but we're going to see", Trump later told reporters when asked about his tweet.

Trump tweeted, "I have asked the SEC to study!", but it officially can only be a request, not an order. That has been required since the Securities Exchange Act of 1934, which was put in place to give more confidence and transparency to investors in the wake of the 1929 stock market crash.

"Investors and other stakeholders benefit when regulations ensure that important information is promptly and transparently provided to the marketplace", said Amy Borrus, CII's deputy director.

Businesses have long complained that the reports require company executives to focus too much on the short term.

Indeed, corporate stocks are known to see sharp gains and falls on the heels of quarterly earnings releases that beat or miss forecasts - and market watchers have often said investors' quick reactions are unwarranted or ill-advised.

In a Friday statement, White House spokeswoman Lindsay Walters said Trump is interested in "examining this issue on whether short-term earnings reporting requirements for public companies reduce incentives for them to engage in long-term investing in the United States".

Even former President Barack Obama spoke out against the short-term nature of the reporting requirements in 2015.

Some investors on Friday said quarterly disclosures are essential for investment decisions and supported richer USA stock valuations, and that shares could become more volatile if companies report twice yearly.

Nooyi issued a statement yesterday about the conversation with the president, saying that many market participants "have been discussing how to better orient corporations to have a more long-term view".

The Trump administration wants to cut red tape that it says is responsible for a 50% drop in companies coming to market over the past two decades, including relaxing some of the disclosure and compliance requirements for listed companies and those looking to go public. What is clear is that investors are more reluctant to invest with companies when they have less information on their performance. Others said that the prospect of fewer financial reports could exacerbate price swings around earnings or fuel insider trading. Moving away from reporting earnings every three months would be a much more dramatic change that would nearly certainly trigger resistance from shareholders who want transparency from the companies they invest in. Nooyi said she thinks it would be beneficial to harmonize American and European rules on financial reporting.

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