The chief executive of Norway’s Folketrygdfondet, Kjetil Houg, has argued that scrapping quarterly reporting would not encourage long-term investing, rejecting claims that less frequent reporting would reduce short-termism in financial markets.

In an opinion piece co-authored with equity portfolio manager, Tine Fossland, the pair said criticism that quarterly reporting encourages companies to prioritise short-term performance over long-term value creation does not hold up.

The comments come as US authorities consider ending quarterly reporting requirements, a move the authors said could pave the way for similar changes in the Nordic region.

While the EU has allowed listed companies to stop publishing quarterly reports since 2017, Houg and Fossland argued the practice remains important for Nordic stock markets.

“Critics argue that frequent reporting encourages companies to make short-term decisions, with the next quarter taking precedence over long-term value creation.
As a long-term investor, we do not believe this criticism holds up,” they wrote.

They argued that moving from quarterly to half-yearly reporting "would not change investors' time horizons”, but instead it would create “greater disparities in the market”, as those closest to a company would gain a greater advantage if information is disclosed less frequently.

Houg and Fossland said retail investors would be most affected by less frequent reporting. In contrast, professional investors would price in the additional uncertainty, potentially increasing companies' capital costs through higher risk premiums.

“Reporting is a mirror, not a motor. It does not create behaviour; it reveals it. If a company prioritises short-term measures at the expense of long-term value creation, that is a governance problem, not a reporting problem.

Instead, they argued that efforts to encourage long-termism should focus on corporate governance, board priorities and executive remuneration, with incentive schemes that reward long-term value creation rather than reducing the flow of information to the market.

The authors also said quarterly reporting is essential for well-functioning capital markets because it provides "regular, relevant and accurate information" to all market participants.

“Quarterly reporting is not an obstacle to long-term value creation. Rather, it is a prerequisite for trust, accountability and well-functioning markets. If we want to encourage long-term thinking in business, we should strengthen transparency – not weaken it,” they concluded.

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