Norges Bank Investment Management (NBIM) made a public call yesterday for jurisdictions – which have not already done so — to stop mandatory quarterly reporting for listed companies, arguing the requirement can lead to short-termism and deter businesses from going or staying public.
The manager of Norway’s Government Pension Fund Global (GPFG) – with NOK20.2trn (€1.7trn) the world’s largest sovereign wealth fund — expressed the opinion both in an opinion article in yesterday’s Financial Times by its chief executive officer Nicolai Tangen, and on its website in one of its infrequent “asset manager perspective” papers published this morning.
Back in 2018 during his first term as US president, Donald Trump – inaugurated yesterday for a second term – instructed the Securities and Exchange Commission (SEC) to consider the idea of altering rules requiring firms to report every quarter, saying it would improve flexibility and save money.
However, over the years the idea was repeatedly de-prioritised by the SEC, and has not led to change.
In the paper, NBIM wrote: “We argue that mandatory quarterly reporting, and the associated pressure on management to meet earnings guidance, can lead to short-term decision-making.
“This hinders sustainable growth and innovation, and may deter companies from accessing public markets,” the central bank department said.
NBIM proposed a shift towards higher quality semi-annual reporting, supplemented by continuous disclosure of material information, saying this would better align managerial and investor behaviour with long-term investment and value creation.
“Regular semi-annual reporting, supplemented with continuous updates of material information, should adequately meet disclosure requirements,” it said in the paper.
Recommending specific measures to “optimise reporting frequency” the Norges Bank unit said: “For this approach to succeed, we need fundamental changes in how companies and investors act, backed by strong regulatory support.”
NBIM noted in the paper that the European Union, UK and Singapore had removed mandatory quarterly reporting, aligning them with Australia and Hong Kong, but “the US decided against removing quarterly reporting requirements, and Japan is maintaining quarterly reporting due to concerns about the current quality of disclosures”.
Almost half of the GPFG’s investments, NOK9trn, were invested in the US at the end of June 2024, compared with NOK1trn in Japanese assets.
In his FT article, Tangen said the current system was not just burdensome, but potentially damaging to market dynamism.
“Since 1996, major equity markets, including the US, have experienced a 40% or greater reduction in the number of public companies,” he said.
“The high regulatory reporting burden could be one factor driving companies to stay private for longer or avoid public markets altogether,” Tangen wrote.
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