A group of prominent accounting academics has submitted a comprehensive comment letter to the Securities and Exchange Commission (SEC) supporting the agency’s proposed rule change that would allow public companies to elect semiannual reporting in lieu of mandatory quarterly filings. The letter, authored by Kris Ramesh of Rice University, Donal Byard and Edward Li of Baruch College, CUNY, and Min Shen of George Mason University, draws extensively on decades of academic research to argue that a flexible, optional approach to reporting frequency is more aligned with current capital market realities and investor needs than a one-size-fits-all quarterly mandate.
The proposal, officially the SEC’s "Semiannual Reporting" initiative (Release Nos. 33-11414; 34-105368; File No. S7-2026-15), aims to introduce a new Form 10-S, which companies could elect to file twice a year, replacing the current requirement for quarterly reports on Form 10-Q. The academic letter, deeply rooted in empirical studies of financial reporting and market behavior, argues that this shift represents a move towards a "regulated choice regime" rather than a reduction in overall corporate disclosure.
Background: The Evolution of Quarterly Reporting
The concept of interim financial reporting has a long and evolving history, predating formal SEC mandates. As detailed in historical accounts, including the foundational work by Leftwich, Watts, and Zimmerman (1981), early interim reporting practices emerged from a mix of voluntary corporate initiatives, stock exchange encouragement, and investor demand. The New York Stock Exchange (NYSE) began advocating for interim earnings reports as early as the 1920s. However, the implementation of uniform requirements faced significant resistance from issuers concerned about competitive disadvantages and the costs associated with more frequent reporting.
The SEC’s own journey toward mandatory quarterly reporting was incremental and met with considerable opposition. While the Securities Exchange Act of 1934 granted the SEC the authority to require quarterly reports, early attempts in the 1940s and 1950s to establish comprehensive quarterly income reporting were withdrawn due to adverse public comment. Instead, the SEC initially mandated quarterly sales or gross revenue reporting on Form 8-K. A significant shift occurred in 1970, following amendments that expanded SEC reporting authority to over-the-counter companies and in the wake of the Wheat Report. This period saw the rescission of semiannual Form 9-K and the introduction of detailed quarterly income reporting on Form 10-Q.
The academics emphasize that this historical trajectory underscores a persistent tension between investor information needs, issuer costs, and regulatory objectives. The proposed optional semiannual framework, they argue, aligns with this historical balance by allowing reporting frequency to better reflect firm-specific costs and investor demands, while acknowledging the continued availability of other disclosure mechanisms.
Research Insights on Market Reactions to Filings
A core argument presented in the comment letter stems from research examining the market’s reaction to SEC filings. A seminal study by Li and Ramesh (2009), which analyzed over 240,000 periodic SEC filings between 1996 and 2006, found that when Form 10-Q filings occur after a company has already released its earnings through a press release, the subsequent market reaction to the 10-Q is consistently muted. This suggests that for a significant portion of filings—estimated at roughly 80% in their sample—the 10-Q’s primary value lies not in being the initial public release of financial information, but rather in providing a standardized, reviewed, legally structured, and searchable record.
"This evidence does not imply that Form 10-Q lacks value," the authors clarify. "Rather, it suggests that the value of Form 10-Q often lies less in being the first public release of information about quarterly financial performance and more in providing a standardized, reviewed, legally structured, and searchable disclosure record." They further note that this distinction is crucial for the current SEC proposal, as it implies that allowing optional semiannual reporting is unlikely to eliminate the principal channel through which investors first receive quarterly financial information for many firms, especially those that continue to voluntarily release quarterly earnings data.
However, the researchers also caution against interpreting these muted market reactions as evidence that standardized SEC filings are unimportant. The immediate price and volume response, captured by market reaction tests, is only one dimension of information content. Standardized filings also provide essential value for comparability, data aggregation, contractual monitoring, litigation discipline, audit committee oversight, and long-term research. The proposed optional approach, therefore, appropriately recognizes this nuance by allowing firms whose investors value quarterly filings to continue with them, while others can opt for semiannual reporting.
The Complementary Roles of Voluntary Earnings Releases and Standardized Filings
The academic analysis highlights the significant and evolving role of voluntary earnings releases in the modern disclosure environment. Research by D’Souza, Ramesh, and Shen (2010b) indicates that these releases often include specific GAAP line-item information, with the choice of disclosed items reflecting the firm’s economic environment and investor valuation demands. For instance, disclosures related to Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) are more common for capital-intensive and highly leveraged firms, while balance sheet disclosures are emphasized when asset information is critical for valuation.
This market responsiveness of voluntary disclosures suggests that companies electing semiannual reporting could continue to issue quarterly earnings releases, thereby providing investors with interim financial information. This continuity is a key reason why optional semiannual reporting is not expected to materially impair capital market functioning.
Nonetheless, the same research also points to a cautionary note: voluntary disclosures are shaped by managerial reporting incentives. Managers who actively manage the reporting process may provide fewer supplemental GAAP line-item disclosures. This finding underscores that voluntary releases, while informative and responsive to demand, can be selective, vary across firms, and be influenced by management’s desire to direct investor attention. Therefore, they are not complete substitutes for the standardization, completeness, review, and discipline offered by SEC filings.
Further research by Barron, Byard, and Yu (2017) distinguished between different types of disclosures within earnings announcements. They found that balance sheet and segment disclosures were associated with increased analyst forecast accuracy for upcoming quarterly earnings, suggesting analysts integrate this information into their private insights. Management earnings forecasts, conversely, primarily improved the common component of analyst information. This distinction implies that the substance of disclosures in earnings announcements, not just their timing relative to Form 10-Q filings, shapes their informational impact. When earnings announcements include detailed balance sheet and segment disclosures tailored to firm-specific economic conditions and investor demand, a substantial portion of the informational function typically fulfilled by a Form 10-Q may already be met.
The implication, the academics argue, is balanced: the SEC should acknowledge the significant role of voluntary earnings releases and not assume that eliminating mandatory quarterly filings will leave investors without meaningful interim information. However, standardized periodic reports remain crucial for comparability, completeness, review, and regulatory discipline, aspects that voluntary releases do not fully replicate. The optional approach therefore supports firms continuing to provide quarterly standardized reporting if investor demand warrants it, while allowing others to reduce mandatory filing frequency.
Ensuring Fair Disclosure in a Flexible Reporting Environment
The potential for increased reliance on voluntary disclosures in an optional semiannual reporting regime raises critical questions about dissemination practices. Research by Dong, Li, Ramesh, and Shen (2015) examined a past practice where sophisticated market participants received earnings press releases 15 minutes before broader public dissemination. Their study found that this priority dissemination contributed significantly to price discovery, particularly for actively traded extended-hours announcements, and benefited transient institutions. However, it also led to higher bid-ask spreads when it created information risk.
This historical evidence is directly relevant to the SEC’s proposal. If voluntary first- and third-quarter earnings releases become a more important source of interim information for companies electing semiannual reporting, the manner of their dissemination becomes paramount. While sophisticated investors and information intermediaries play a vital role in price discovery, market mechanisms function best when material information is disseminated broadly, promptly, and fairly. Regulation FD and Form 8-K’s Item 2.02 already provide a foundational framework for this objective. The academics recommend that the SEC make it clear that selective private disclosure of material quarterly information remains impermissible and continue to enforce Regulation FD rigorously, ensuring favored access to analysts or institutional investors is prohibited.
The SEC’s own investor education materials, such as Investor.gov, emphasize practical tools and safeguards that benefit retail investors through fair market-wide price formation, transparent costs, fraud prevention, and effective intermediaries, rather than assuming individual investors will analyze every detailed filing. This perspective aligns with an optional semiannual reporting framework, provided that material voluntary disclosures are disseminated broadly and fairly, and Regulation FD is effectively enforced.
The Timeliness-Reliability Tradeoff
The academics also address the inherent tradeoff between the timeliness and reliability of information. A study by Bronson, Hogan, Johnson, and Ramesh (2011) on the impact of PCAOB Auditing Standards Nos. 2 and 3 on preliminary annual earnings releases found that while these standards increased audit report lags, many firms maintained their historical release dates, leading to more instances of preliminary earnings being released before the audit was complete. This resulted in a higher likelihood of revisions to preliminary announcements.
Adapting this insight to the interim reporting context, the researchers argue that mandating independent reviews for all voluntary quarterly earnings releases by semiannual filers could significantly undermine the cost savings and flexibility that motivate the proposal. Instead, they suggest a more targeted approach: requiring prominent disclosure of whether a voluntary quarterly earnings release has been reviewed by an independent public accountant. This would allow investors to assess the reliability of the information and price it accordingly, while preserving issuer flexibility.
The Role of Information Intermediaries
The modern financial information ecosystem is far more complex than the one in which quarterly reporting was originally mandated. Information now flows through a sophisticated network of newswires, data aggregators, analysts, institutional investors, and trading platforms. Two studies cited—Li, Ramesh, and Shen (2011) on Dow Jones Corporate Filing Alerts and D’Souza, Ramesh, and Shen (2010a) on Standard & Poor’s dissemination of data—demonstrate that periodic SEC filings are critical inputs into this broader ecosystem. These studies found that newswires often issue alerts for filings where market demand for information is high, and these alerts, rather than the underlying SEC filings themselves, sometimes trigger immediate market activity. Similarly, data aggregators like S&P disseminate accounting information with varying speeds influenced by market demand and supply-side forces.
These findings reinforce that while standardized SEC filings are crucial inputs, intermediaries play a vital role in identifying, processing, and redistributing this information. Another study, Li (2013), examined Form 8-K current reporting as an alternative channel for timely disclosure of material events. It showed that accelerated 8-K filings for material contracts were associated with lower information asymmetry, highlighting the importance of current reporting for timely disclosure of events that should not wait for periodic reports.
Therefore, if the SEC adopts optional semiannual reporting, the academics recommend preserving both components of the disclosure infrastructure: maintaining the quality and usability of standardized periodic reports (Form 10-S) with narrative and financial information comparable to Form 10-Q, and retaining Inline XBRL tagging; and preserving and enforcing a robust Form 8-K system for material developments between periodic reports.
Investor Demand as a Disciplining Force
The research on newswires and data aggregators also suggests that investor demand will naturally discipline reporting choices. Firms with substantial institutional ownership, significant analyst following, index membership, debt market monitoring, frequent capital market access, or complex operations are likely to face strong market demand for quarterly information. For these firms, switching to semiannual reporting could lead to reduced analyst coverage, decreased market attention, lower liquidity, increased information asymmetry, or a higher cost of capital. Consequently, they may rationally opt to continue quarterly reporting or adopt a hybrid approach by issuing voluntary quarterly earnings releases while filing Form 10-S semiannually.
Conversely, for firms where quarterly financial statements offer limited incremental information compared to event-driven disclosures and business milestones—such as pre-revenue biotechnology companies focusing on clinical and regulatory developments—mandatory quarterly reporting may impose costs that outweigh benefits. The academics advocate for allowing all Exchange Act reporting companies to elect semiannual reporting, rather than restricting eligibility to specific categories like smaller reporting companies or emerging growth companies. They argue that size alone is not a sufficient determinant of optimal disclosure frequency, as investor demand for timely standardized information is influenced by a complex interplay of ownership structure, analyst following, index membership, arbitrage costs, information intermediaries, and disclosure practices, which do not map perfectly onto issuer size.
Conclusion and Recommendations
In their conclusion, the academics reiterate their support for the SEC’s optional semiannual reporting proposal, deeming it "directionally appropriate." They acknowledge that potential cost savings from such a rule change, such as redirecting managerial time, are difficult to quantify but are nonetheless significant. The research presented suggests that while quarterly information can be valuable, Form 10-Q filings are not always the primary or most important channel for market-relevant information. The modern disclosure ecosystem, with its array of earnings releases, Form 8-K disclosures, Regulation FD, analyst activities, and various information intermediaries, plays a central role.
However, standardized SEC filings remain indispensable for comparability, reliability, investor protection, and the functioning of information intermediaries. Therefore, the academics recommend that if the SEC adopts optional semiannual reporting, it should ensure that Form 10-S retains the standardized and reviewed nature of Form 10-Q, maintain robust Form 8-K and Regulation FD requirements, and implement targeted transparency regarding the assurance status of voluntary first- and third-quarter earnings releases. This balanced approach, they argue, would provide greater flexibility for firms and investors to choose a reporting frequency that best suits firm-specific circumstances without materially impairing capital market functioning. The core principle is that management and investors are best positioned to assess and weigh these firm-specific tradeoffs, making flexibility the cornerstone of an effective regulatory framework.
