by Andreea Moraru-Arfire
, 24.07.26
Imagine a GPS that recalculates your route every ten seconds. While your data would be up-to-date, you would risk focusing on minor, short-term route adjustments rather than your final destination. Conversely, an update only once an hour might cause you to drive straight into a major traffic jam before the system alerts you. Between an excess of information and a lack of immediate visibility, where does the optimal informational equilibrium lie? Research from Andreea Moraru-Arfire, Assistant Professor of Accounting at ESSEC Business School, Andrei Filip (IESEG School of Management) and Junqi Liu (Xiamen University) explores the information environment in financial reporting frequency, and was recently cited in the context of different financial reporting frequency mandates by the United States’ Securities and Exchanges Commission (SEC).
For more than half a century, the SEC has mandated a high-frequency reporting cadence, requiring public firms to issue their financial statements every quarter. However, a significant regulatory shift is currently under evaluation. In May 2026, the SEC issued a historic proposed rule, evaluating whether to allow public companies flexibility to transition from a mandatory quarterly reporting model to a semiannual reporting framework.
The great disclosure debate: Short-termism versus market blind spots
The regulatory consultation highlights a long-standing tension between two distinct economic theories regarding capital market efficiency: managerial short-termism and information asymmetry. For several years, prominent corporate leaders have documented the potential negative externalities of a high-frequency reporting model. In 2018, Jamie Dimon, CEO of JPMorgan Chase, and Warren Buffett, Chairman of Berkshire Hathaway, argued that an over-emphasis on 90-day earnings targets contributes to managerial short-termism. From this perspective, the pressure to meet quarterly benchmarks can distort managerial incentives, leading executives to defer positive NPV investments, such as R&D or long-term capital expenditures, simply to smooth short-term accounting earnings. Proponents of the SEC’s proposed reform also point out that quarterly preparation imposes substantial direct compliance costs and administrative burdens, which fall disproportionately on smaller, growth-oriented issuers.
Conversely, capital market theories emphasize the role of periodic disclosures in mitigating information asymmetry—the structural imbalance of information between corporate insiders and external users of financial statements. Proponents of this view hypothesize that extending the reporting interval from three months to six months increases the information gap. In a fast-moving macroeconomic environment, a longer disclosure interval could reduce price discovery efficiency, increase idiosyncratic stock price volatility around delayed announcement dates, and potentially widen the window for insider trading.
The literature suggests that opting for a lower-frequency reporting model introduces several capital market frictions. Modern asset pricing theory dictates that investors demand a risk premium when operating under higher information uncertainty. If a firm provides formal, verified accounting data less frequently, the market may price this information risk, potentially increasing the firm's implied cost of capital.
In addition, information intermediaries optimize their own resource allocation. Financial analysts serve as key information intermediaries in capital markets. They collect public disclosures, evaluate corporate strategies, and generate earnings forecasts that guide broader investor valuations and ultimately capital allocation. Analysts may reduce coverage of firms reporting on a semiannual basis in favor of quarterly reporting peers, where data is easier to validate. A decline in analyst coverage can then lead to lower market liquidity and reduced institutional visibility.
Global clues: What do 49 countries reveal about reporting frequency?
As regulators and market participants analyze this potential shift, a foundational question emerges. How does a change in mandatory reporting frequency affect the efficiency and quality of the market's information environment? To address this question, policymakers require rigorous, data-driven insights rather than theoretical conjectures. The research paper evaluates the effects of disclosure frequency, providing empirical evidence on how financial reporting frequency is associated with the predictable quality of the information ecosystem that market participants rely upon.
The researchers analyzed the capital market effects of mandatory interim reporting frequencies across an expansive sample of annual earnings forecasts spanning 49 countries over multiple decades. Because different global jurisdictions have historically maintained varying institutional requirements—with the U.S. strictly mandating quarterly reporting, while several European and Asian markets permitted or required semiannual reporting—the international cross-section provides a robust setting to isolate the effects of reporting mandates. The study operationalizes the quality of the corporate "information environment" by measuring the earnings forecast accuracy of financial analysts. By analyzing analyst forecast errors—the absolute difference between an analyst’s predicted earnings per share and the actual reported earnings per share—the research quantifies the precision of the information available to the market under various reporting regimes.
The study’s empirical findings reveal a consistent statistical relationship: mandatory quarterly reporting regimes are significantly associated with lower analyst earnings forecast errors compared to semiannual reporting regimes. This finding is further supported when evaluating an exogenous regulatory shift within a single country: Japan’s 2008 switch from a semiannual to a mandatory quarterly reporting framework, which resulted in a notable, localized drop in forecast errors.
However, the data indicate that a reporting mandate is not a one-size-fits-all mechanism. The informational benefits of quarterly reporting mandates are highly conditional, proving to be significantly more pronounced in specific environments. Specifically, the reduction in forecast errors is concentrated among smaller firms, firms with low baseline analyst coverage, and firms experiencing high pre-release forecast dispersion. Crucially, a distinct substitution effect emerges at the country level: mandatory quarterly updates yield the most significant improvements in analyst accuracy for firms listed in jurisdictions characterized by weak corporate governance regulations, low judicial efficiency, and low overall disclosure quality, suggesting that where alternative information channels and institutional safeguards are weak, the mandated frequency of financial statements steps in to anchor market visibility.
What lies ahead
The SEC’s 2026 consultation period marks a pivotal moment in securities regulation, attempting to balance direct corporate compliance relief against capital market data transparency. If the proposed framework is finalized, it could spark a dynamic landscape where public companies actively choose their own disclosure rhythms, forever changing how corporate performance is presented and absorbed.
Looking forward, this shift will likely accelerate the adoption of cutting-edge predictive analytics and alternative data sources. If traditional financial checkpoints become less frequent for certain companies, the market will naturally look for next-generation tools to fill the gap. Financial analysts and corporate leaders will operate on a brand-new frontier—one where competitive advantage is built on how quickly and accurately participants can interpret less frequent data, or how effectively management can sustain market visibility without a regulatory script. Ultimately, this ongoing evolution emphasizes that capital market disclosure is a living, changing framework rather than a fixed rulebook. Whether a flexible, dual-track structure unlocks a new era of long-term corporate growth or recalibrates how investors measure risk, the post-consultation era promises to alter the landscape of market transparency and corporate communication for years to come.
References
Filip, A., Moraru-Arfire, A., and Liu, J., 2024. Shaping the Information Environment: International Evidence on Financial Reporting Frequency and Analysts' Earnings Forecast Errors. Journal of Accounting, Auditing & Finance, 29 (3) https://doi.org/10.1177/0148558X221141568
Securities and Exchange Commission. 2026. Release No. 33-11414, Semiannual Reporting. https://www.sec.gov/files/rules/proposed/2026/33-11414.pdf
