Less reporting does not increase long-termism

Critics argue that frequent reporting pushes companies towards short-term decisions, where the next quarter overshadows long-term value creation. As a long-term investor, we believe this criticism misses the mark.

A shift from quarterly to semi-annual reporting does not change investors’ time horizons. Instead, it creates differences in the market. Less frequent reporting increases the gap in access to information between company insiders and other market participants. Those closest to the companies will have an ever-greater advantage if information is shared less frequent.

The losers in such a regime would primarily be retail investors, who would face the greatest challenges in compensating for poorer access to information. Less frequent reporting could also increase costs for companies. Professional investors will price in the greater uncertainty that follows from less frequent reporting, whether they invest in equity or debt. The result may be higher capital costs for companies through increased risk premiums.

Reporting is a mirror, not an engine. It does not create behaviour; it makes behaviour visible. If a company prioritises short-term measures at the expense of long-term value creation, that is a governance problem, not a reporting problem. To counter short-termism, measures should instead be directed at corporate governance, board priorities and how management is rewarded. Incentive schemes that reward long-term value creation and align the interests of management and owners are more effective than reducing the flow of information to the market.

Well-functioning capital markets depend on regular, relevant and accurate information being available to all market participants. It is important that information is shared while it remains relevant. Quarterly reporting is central to achieving this.

Quarterly reporting contributes to discipline. Regular and frequent reporting gives owners, lenders and other stakeholders insight into whether companies are actually moving towards their long-term goals, and makes it possible to hold management and boards accountable along the way. With fewer reporting points, the risk increases that small problems are allowed to grow before the market is informed.

Quarterly reporting is not an obstacle to long-term value creation, but a prerequisite for trust, accountability and well-functioning markets. If we want to promote long-termism in business, we should strengthen — not weaken — transparency.

Tine Fossland 
Portfolio Manager, Equities

Kjetil Houg 
Chief Executive Officer