Quarterly reporting is often blamed for corporate myopia, an overemphasis on meeting short-term earnings expectations at the expense of long-term value. Most US companies operate on investment cycles measured in years, not quarters, and investors often price stocks on even longer earnings horizons. In this context, changing reporting frequency does little to shift managerial behavior, while incentive structures — particularly executive compensation cycles — exert far greater pressure on short-term decisions.
The question for financial analysts is whether reducing reporting frequency would improve long-term decision-making or simply weaken transparency and market efficiency. The evidence shows that it would not, and that such a shift would likely harm liquidity and reduce the reliability of information available to the market.
Revisiting the Short-Termism Debate
The debate is not new. The causes and consequences of short-termism have been examined for decades by academics, commentators, lawmakers, and practitioners. Prominent figures such as Jamie Dimon and Warren Buffett have publicly criticized the short-termism culture. Their concerns are reinforced by a 2004 survey of financial executives showing that half were willing to forgo positive NPV projects to avoid missing quarterly earnings expectations1.
Although there is broad agreement that myopic corporate strategies harm investors and the market, it is not clear that ending quarterly reporting would solve the problem. Quarterly reporting and earnings guidance are associated with higher analyst coverage, greater liquidity, more transparent information, and lower volatility, all of which help cost of capital2, 3, 4, 5. When earnings releases become less frequent, information asymmetry rises and the risk of insider trading increases.
The United Kingdom and Europe offer recent natural experiments. When regulators ended mandatory quarterly reporting in 2014, firms did not increase CapEx or R&D spending, contrary to what would be expected if quarterly earnings truly induced myopic management6.
Furthermore, some practitioners and academics argue that companies would face less short-term pressure if more of their shareholder base consisted of long-term investors. From this perspective, firms seeking to attract such investors should reduce short-term guidance and place greater emphasis on long-term forecasts.
Such a shift in strategic focus and disclosure toward longer-run performance creates a virtuous cycle—one in which companies that gain the interest and backing of investors with longer horizons end up reinforcing management’s confidence to undertake value-adding investments in their company’s future.
Sarah Keohane Williamson and Ariel Babcock, FCLTGlobal (2020)7
Paradoxically, a 2016 study found no difference in long-term investment levels between firms that issued long-term forecasts and those that provided only short-term guidance8. This highlights the lack of consensus on how disclosure practices influence managerial horizons.
A natural question follows: what constitutes a long-term horizon for corporate strategy? If the goal of reducing reporting frequency is to curb short-termism, it is reasonable to ask whether extending the reporting interval by three months would meaningfully influence managerial decision-making.
When Investment Horizons Outrun Reporting Cycles
As an initial way to approximate corporate investment horizons, I classified all US publicly traded companies using the industry classification benchmark (ICB) and used each sector’s two-year average ROIC turnover as a proxy for payback periods. This approach provides a practical, if simplified, measure of how long it takes firms to recover invested capital under steady-state conditions.
Figure 1: ROIC, ROIC turnover & P/E analysis.
Source: Bloomberg data and proprietary analysis (full table on appendix).
My analysis shows that the average weighted ROIC turnover for US listed companies is roughly five years, with sector averages ranging from about three years in the lowest quartile to 22 years in the highest. The sample includes 3,355 publicly traded US companies, grouped into 42 ICB sectors and ranked by quartile.
The longer the payback period (ROIC turnover), the less impact a three-month shift in reporting frequency is likely to have on corporate behavior. Managers would still face pressure to avoid near-term performance declines when initiating positive NPV projects; the definition of “short term” would simply move from three months to six months.
Another lens on short-termism is the price-to-earnings (P/E) ratio. The P/E indicates how many years of current earnings it would take for investors to recoup their initial investment, assuming no change in earnings. A P/E of 10x, for example, implies a 10-year earnings horizon.
High P/E ratios are common among growth companies, reflecting investor expectations for strong future performance through revenue expansion or margin improvement. Together with the ROIC-turnover results, P/E multiples help illustrate how investors weigh a firm’s long-term potential relative to near-term earnings. In general, companies with high P/E ratios face less pressure to deliver short-term results.
Figure 2: ICB sector: ROIC & P/E ratio.
Source: Bloomberg data and proprietary analysis (full table on appendix).
US equities currently trade at an average P/E of 42.5x, with sector multiples ranging from 12.3x in life Insurance to 241x in automobile and parts. The highest-multiple companies are concentrated in the technology sector — such as Tesla (280x), Palantir (370x), Nvidia (45x), Apple (36x), Meta (21x), and Alphabet (34x) — reflecting strong investor expectations and the influence of AI-related optimism.
Whether these valuations reflect a bubble or not, paying the equivalent of more than 40 years of earnings suggests that short-term results are not the primary driver of investor expectations.
Taken together, the evidence indicates that quarterly earnings should not be blamed for corporate myopia. Several alternative approaches to reducing short-term pressures have been proposed that do not require eliminating quarterly reporting9.
The Limits of Changing Disclosure Frequency
One of the most effective ways to reduce short-term pressure would be to lengthen the duration of executive compensation, which is typically structured around a one-year performance cycle10. Such short horizons are misaligned with the multi-year payback periods implied by ROIC and P/E measures, and they can create incentives for managers to prioritize near-term results over positive NPV projects. When compensation is tied tightly to annual outcomes, deferring value-adding investments becomes a rational, though suboptimal, response.
The central question is whether less-frequent disclosure would help or harm market participants. Reduced reporting is associated with lower liquidity, less transparency, higher volatility, and a higher cost of capital, while there is little evidence that it meaningfully reduces short-term incentives. Given these trade-offs and the availability of other tools to better align managerial incentives with long-term value, it is prudent to approach any move away from quarterly reporting with caution.
1 The economic implications of corporate financial reporting
2 To guide or not to guide
3 On guidance and volatility
4 The Deregulation of Quarterly Reporting and Its Effects on Information Asymmetry and Firm Value
5 Financial reporting frequency, information asymmetry, and the cost of equity
6 Impact of reporting frequency on UK Public companies
7 Attracting Long-Term Shareholders
8 Long-Term Earnings Guidance: Implications for Managerial and Investor Short-Termism
9 Curbing Short-Termism in Corporate America: Focus on Executive Compensation
10 Optimal Duration of executive pay
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