James J. Park


Since 1970, the Securities and Exchange Commission (SEC) has required public companies to file reports summarizing their financial performance on a quarterly basis. Such mandatory quarterly disclosure has recently been criticized as incentivizing corporations to deliver short-term results rather than developing sustainable, long-term strategies. This Article examines the origins of the quarterly reporting system to assess whether the SEC should reduce the frequency of periodic filings. It concludes that much of the pressure on public companies to deliver short-term results emerged as the market increasingly focused on earnings projections issued by research analysts. The pressure to meet such projections can distort the behavior of public companies, but such distortions will only be significant in certain circumstances. Because it is unclear that the quarterly reporting system substantially impacts company incentives, the SEC should pursue modest reforms rather than take the radical step of eliminating quarterly disclosure. Quarterly disclosure is one example of how securities law tends to promote the short-term interests of transacting investors. In contrast, corporate law, which mediates the interests of shareholders, often gives managers the discretion to consider long-term interests. Strong securities law can be balanced by weak corporate law.



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