Grapevine

More frequent financial reporting benefits investors

When it comes to financial reporting, how much information is too much? Public companies in the U.S. file reports every three months to comply with the rules of the Securities and Exchange Commission.

Some critics think that's too often, arguing it focuses companies too much on short-term financial results and too little on long-term efforts such as research and development. In 2013, the European Union abolished the quarterly requirement. The SEC considered a similar move in 2018, although the agency ultimately rejected it.

But new research from Yong Yu, professor of accounting at Texas McCombs, presents evidence for keeping corporate reports quarterly. It finds that more frequent reporting aids investors.

When companies report financial results more often, he finds:

The added information helps investors better predict future earnings and more efficiently determine a stock's price.