Do The Securities Laws Promote Short-Termism?
10 UC Irvine L. Rev. (2020 Forthcoming)
60 Pages Posted: 20 Jun 2019 Last revised: 17 Jul 2019
Date Written: July 6, 2019
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
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