Companies urged to stop issuing quarterly earnings reports – Norway’s sovereign wealth fund
Norway’s sovereign wealth fund, Norges Bank Investment Management (NBIM), recently proposed ending quarterly earnings reports for publicly listed companies. Instead, they suggest opting for semi-annual results to promote better long-term decision-making. The fund, with a portfolio of $1.8 trillion and investments in nearly 9,000 companies across 70 countries, holds significant influence in the global financial landscape.
According to NBIM, regular semi-annual reporting, supplemented by continuous updates of material information, can adequately fulfill disclosure requirements. The fund’s argument against quarterly reporting cycles stems from the belief that such short-term focus may lead companies to prioritize immediate profits and meeting analyst forecasts over long-term investments, value creation, and sustainable development. This emphasis on quarterly results could potentially hinder the benefits of being publicly listed and discourage companies with long-term strategies from pursuing or continuing public listings.
The decline in the number of companies listed on stock exchanges in recent years has coincided with a rise in private equity ownership. The Norwegian government restricts NBIM from investing in private equity funds. JPMorgan Chase CEO Jamie Dimon highlighted last year that increasing reporting demands and the relentless pressure of quarterly earnings may contribute to companies avoiding public listings. This trend limits investors’ risk diversification opportunities.
Established in 1996 to preserve petroleum revenue for future generations, the Norwegian wealth fund has grown exponentially to exceed Norway’s annual gross domestic product threefold. This translates to each Norwegian citizen having approximately $310,000 invested on their behalf. The fund’s asset allocation as of June 30, 2024, included 72% in equities, 26% in fixed income markets, 1.7% in unlisted real estate, and 0.1% in unlisted renewable energy infrastructure such as wind farms.
By advocating for a shift from quarterly to semi-annual reporting, NBIM aims to promote a more strategic and sustainable approach to corporate finance. This move could prompt companies to focus on long-term performance, innovation, and responsible growth, ultimately benefiting investors, stakeholders, and the economy at large. Thus, the proposal seeks to address the challenges imposed by short-termism and foster a culture of forward-thinking and responsible governance within the corporate sector.
