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Trump suggestion on earnings report requirements might be worth pilot study, finance researcher says

Friday, August 17, 2018

LAWRENCE — President Donald Trump tweeted Friday he has directed the U.S. Securities and Exchange Commission to study expanding quarterly reporting requirements to six months, and the idea is worth examining based on what has happened elsewhere, a University of Kansas finance researcher said.

Felix Meschke, associate professor of finance in the School of Business, is available to discuss the proposal. He teaches investment theory and applications and has co-authored several studies on factors related to firm performance.

"The policy proposal is aimed at reducing corporate myopia — related to having to meet or beat quarterly earnings forecasts," Meschke said. "There are recent studies in top academic journals that suggest that this is indeed a concern."

U.S. public companies are required to report their sales, profits and state of the company's balance sheet every quarter since the passage of the Securities Exchange Act of 1934, which was aimed at giving more confidence and transparency to investors in the wake of the 1929 stock market crash.

However, Meschke said U.K. companies do not have a mandate on quarterly earnings numbers, yet nine out of 10 firms still report those number voluntarily. 

"It could be prudent to do a pilot study like the SEC did prior to enacting in 2005 Regulation SHO," Meschke said, "a rule that first eliminated the uptick rule for a group of randomly selected firms so that we could study the effects."

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