Quarterly Earnings

I don't see any evidence that annually reporting firms in other countries have a longer-term management focus. Quarterly earnings limit the ability of managers to spin stories to manipulate the stock price, and keep attention focused on relevant accounting data.

"Short-termism" is a persistent myth. What are the highest priced stocks? Electric cars, rocket ships to mars, hallucinating AI. With elephants of regulatory dysfunction in the room, we worry about how frequency of accounting reports affect CEO psychology?

Public firms like to show smooth earnings, expecting investors to penalize bad surprises. They sometimes have incentives to sacrifice total economic shareholder value to "fill in potholes" when near-quarter results are threatened.

Earnings releases provide near-term performance information regardless, so changing the horizon of releases should not be a substantial factor in the longer horizon of decision-making.

My JAE paper shows that 78% of CFOs admit to sacrificing long-term value to manage quarterly earnings (link below). Moving to annual might mitigate this problem - but at a cost of less information being available. The UK evidence suggests there is little impact on investment.
-see background information here
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Two countervailing effects -- perhaps less short-term, but less accountability. The latter is a bigger problem than the former. Better to have quarterly reporting, but with less onerous / invasive audit requirements. E.g., SOX 404 attestations every three years, not every year.

It would relieve short term pressure, but not clear that they would necessarily become patient long-term oriented.

From Graham, Harvey and Rajgopal (2005): "A surprising 78% of our sample admits to sacrificing long-term value to smooth earnings. "
-see background information here

One year versus one quarter is not that different. And, there are so many other ways in which firms will be myopic that I think this change won’t matter.

Continuous complete transparency would provide managers with maximal information and allow the best informed decisions. The only counterarguments are strategic (keeping info from competitors) and the costs of reporting, neither of which can justify moving to annual.

I am not sure about the short term focus but I do think it lets the management to focus more on the firm strategy. It could be a positive change.

Their primary horizons are already likely to be longer than just a few quarters.

Investors and CEOs both understand that stock prices are not driven by one quarter's worth of earnings, and that it's all about the forward guidance. The information loss from infrequent and lagged reporting would increase uncertainty and lower firm value.
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Wild idea: how about letting the market decide what+how often reports are useful? (Without having to go private?) With big issues on the table -- corporate and individual taxes, regulatory and FDA assault, etc. -- the frequency of mandated reports seems like a 0.0000001% issue.

The tradeoff is the benefit of reducing bad short-term incentives versus the cost of less public information. More frequent disclosure aids shareholder governance and the allocation of capital to firms by the market. I suspect the tradeoff somewhat favors quarterly disclosure.

Reducing information to shareholders is unlikely to benefit them and increases the scope to obscure relevant information. This is unlikely to be outweighed by costs of reporting.

Currently, there is plenty of value destruction. Investment is delayed to "hit" the quarterly target. Annual = less information. Another strategy is real time reporting of certain metrics. This would known to be noisy & there would be no incentive to manage on a quarterly basis.

Very hard to know the net effects, for instance it would become easier to hide bad decisions for longer periods.

While less frequent reporting might increase managers’ investment horizons, it will arguably also increase information asymmetry. This will make monitoring more difficult (i.e., costly) and thus increase agency costs.

Frequent disclosures would provide investors with maximal information about long-term investments which would then be more rapidly reflected in prices. The costs of reporting cannot justify moving to annual reporting (which could lead to more liability from improper disclosure).

Too much loss of information. the quarterly reports are already fairly infrequent in this modern fast-paced economy. The information loss from going to annual filings would be substantial. What we need is both quarterly and annual reports. The annual report can focus on long-run