Do The Securities Laws Promote Short-Termism?

10 UC Irvine L. Rev. (2020 Forthcoming)

UCLA School of Law, Law-Econ Research Paper No. 19-07

60 Pages Posted: 20 Jun 2019 Last revised: 17 Jul 2019

See all articles by James J. Park

James J. Park

University of California, Los Angeles (UCLA) - School of Law

Date Written: July 6, 2019

Abstract

Since 1970, the Securities & Exchange Commission (SEC) has required public companies to disclose their quarterly financial performance. This mandatory quarterly reporting system has recently been criticized as incentivizing corporations to deliver short-term results rather than developing sustainable, long-term strategies. This Article examines the origins of quarterly reporting to assess whether the SEC should reduce the frequency of periodic reports. It concludes that much of the pressure on public companies to deliver short-term results emerged as the market increasingly focused on earnings projections issued by research analysts. Rather than reducing periodic disclosure, the SEC should consider increasing company disclosure relating to projections. Quarterly reporting highlights the tendency of securities law to promote the interests of transacting investors. As securities regulation has increasingly pressured public companies to deliver short-term results, there is a stronger case that corporate law should give managers substantial discretion to consider long-term interests. Strong securities law can be checked by weak corporate law.

Keywords: Securities Regulation, Securities Laws, Quarterly Reporting, Short-termism, Corporate Law, Corporate Governance

Suggested Citation

Park, James J., Do The Securities Laws Promote Short-Termism? (July 6, 2019). 10 UC Irvine L. Rev. (2020 Forthcoming); UCLA School of Law, Law-Econ Research Paper No. 19-07. Available at SSRN: https://ssrn.com/abstract=3406836

James J. Park (Contact Author)

University of California, Los Angeles (UCLA) - School of Law ( email )

385 Charles E. Young Dr. East
Room 1242
Los Angeles, CA 90095-1476
United States

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