In the grand theatre of Indian business, there is no ritual more sacred—or more misleading—than the quarterly earnings report.
Every three months, it becomes a high-stakes corporate spectacle, a nationwide tamasha where armies of analysts parse every decimal point, and CEOs hold their breath explaining deviations in earnings.
The entire exercise is framed as a hallmark of a healthy, transparent market. Under SEBI’s Listing Obligations and Disclosure Requirements (LODR), Indian companies are locked into this rigid system, required to submit quarterly financial results within 45 days of a quarter’s end.
Yet powerful voices—from legendary investor Warren Buffett and Jamie Dimon to former SEBI chairman M. Damodaran—have long argued that this ritual is not a sign of health but a slow-acting poison pill.
They contend that the relentless pressure to meet short-term targets forces companies to sacrifice their long-term vitality. Here lies the central paradox of short-termism: the very pressure that strangles national innovation can actually benefit an individual company’s bottom line.Groundbreaking research by Stephen Terry of Boston University reveals a counterintuitive finding: the pressure to hit quarterly targets disciplines managers who might otherwise over-invest in R&D projects.This sharp-edged discipline can boost a firm’s value—a tidy 1% gain in exchange for a little less daydreaming in the R&D labs. But when every company adopts this short-sighted discipline, the cumulative effect creates a massive negative externality for the entire economy.
When thousands of firms trim their R&D budgets to make the next quarter’s numbers look good, they are collectively cutting off the nation’s primary source of future growth.
It is a classic “tragedy of the commons” for innovation, where individually rational decisions lead to a collectively disastrous outcome.
Moreover, global research provides concrete evidence of the substantial costs imposed by quarterly reporting. Analysis of SEC filings shows that out-of-pocket cash expenses for quarterly reporting can reach $100,000 per period for large companies, including fees to lawyers, auditors, tax experts, and IR/PR consultants.
The burden disproportionately affects smaller companies. Audit Analytics data shows smaller firms pay $3,345 per $1 million of revenue in audit fees, compared to just $541 per $1 million for large accelerated filers—a six-fold difference, representing 0.33% versus 0.05% of revenue, respectively.
Beyond monetary costs, management time represents a significant opportunity cost. Research indicates CEOs spend about 2% of their time, and CFOs about 5%, on quarterly filings.
Long before this global trend gained momentum, one of India’s most respected regulators was already sounding the alarm. M. Damodaran, former SEBI Chairman, was a prescient voice calling for a fundamental rethink of this obsession with short-term metrics.
Speaking in a 2018 interview, he recalled his earlier warnings, noting wryly that the ideas being championed by Warren Buffett were ones he had advocated for years earlier. “This is not anything new, except the fact that it’s coming from Warren Buffett—that is why everybody is sitting up and taking notice.”
Indian CEOs like Uday Kotak (Kotak Mahindra Bank), Rohit Jawa, HUL, Vishal Sikka (Infosys), and N. Chandrasekaran (when he was CEO of TCS) have also voiced concerns over the undue pressure from quarterly earnings, which compromises long-term investment for both the company and the industry.
Conclusion: India at a Crossroads
The evidence is overwhelming. The quarterly reporting system, originally intended to promote transparency, is morphing into a value-destroying machine.
It encourages a culture of short-term gamesmanship, forcing managers to sacrifice long-term innovation and national prosperity for the fleeting reward of meeting a quarterly number.
The European Union acted a decade ago, Japan followed in 2024, and Singapore moved to a risk-based approach. The result? Not chaos.
When the UK removed the mandate, a crucial fact emerged: less than 10% of companies actually stopped issuing quarterly reports.
The system has become an institutional imperative, cloaked in the guise of high standards of corporate governance. Meanwhile, the rise of China in the global innovation map—with limited investor disclosure—contrasts with US companies, where the staggering cost of inaction is immense.
Today, India’s continued adherence to the old model is a conscious and increasingly risky choice. The current system primarily benefits short-term traders and analysts, not the long-term investors who are the true bedrock of a nation’s capital markets.
The high churn in mutual funds attests to the short-term nature of the investment world, while government initiatives like Production-Linked Incentives highlight how corporate R&D has been deprived for many years.
Days are not far when quarterly earnings pressure will be called the “innovation butcher.” As the world moves at hyper-competitive speed, it is time for corporate India and regulators to find the courage to end the tyranny of the quarterly earnings syndrome.
(The author is founder of Vallum Capital Advisors, a Portfolio Management firm managing equity investments)
(Disclaimer: Recommendations, suggestions, views, and opinions given by experts are their own. These do not represent the views of The Economic Times)
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