Friday, November 20th, 2015 8:42 am

Quarterly Earnings

Question A:

Letting publicly traded US firms report earnings annually rather than quarterly would lead their executives to place more weight on long-term issues in their investments and other decisions.

Responses
 

Source: IGM Economic Experts Panel
www.igmchicago.org/igm-economic-experts-panel

Responses weighted by each expert's confidence

Source: IGM Economic Experts Panel
www.igmchicago.org/igm-economic-experts-panel

Question B: A switch from quarterly to annual earnings reports would, on net, benefit shareholders.

Responses
 

Source: IGM Economic Experts Panel
www.igmchicago.org/igm-economic-experts-panel

Responses weighted by each expert's confidence

Source: IGM Economic Experts Panel
www.igmchicago.org/igm-economic-experts-panel

Question A Participant Responses

Participant University Vote Confidence Comment Bio/Vote History
Acemoglu Daron Acemoglu MIT Uncertain 5
Bio/Vote History
         
Alesina Alberto Alesina Harvard No Opinion
Bio/Vote History
         
Altonji Joseph Altonji Yale Agree 3
Bio/Vote History
         
Auerbach Alan Auerbach Berkeley Disagree 3
Bio/Vote History
         
Autor David Autor MIT No Opinion
Bio/Vote History
         
Baicker Katherine Baicker Harvard Uncertain 3
Bio/Vote History
         
Banerjee Abhijit Banerjee MIT Agree 7
Bio/Vote History
         
Bertrand Marianne Bertrand Chicago Strongly Agree 6
Bio/Vote History
         
Brunnermeier Markus Brunnermeier Princeton Agree 9
Bio/Vote History
         
Chetty Raj Chetty Stanford Did Not Answer
Bio/Vote History
         
Chevalier Judith Chevalier Yale Uncertain 8
Firms may well still choose to report quarterly. And a year is still a short horizon for investment projects.
-see background information here
Bio/Vote History
         
Cutler David Cutler Harvard Uncertain 5
Bio/Vote History
         
Deaton Angus Deaton Princeton No Opinion
Bio/Vote History
         
Duffie Darrell Duffie Stanford Did Not Answer
Bio/Vote History
         
Edlin Aaron Edlin Berkeley Agree 5
Bio/Vote History
         
Eichengreen Barry Eichengreen Berkeley Agree 5
"Allow them to" would be more appropriate language than "lead them to." At most a _very_modest positive.
Bio/Vote History
         
Einav Liran Einav Stanford Uncertain 6
Bio/Vote History
         
Fair Ray Fair Yale Disagree 4
Bio/Vote History
         
Finkelstein Amy Finkelstein MIT Did Not Answer
Bio/Vote History
         
Goldberg Pinelopi Goldberg Yale Did Not Answer
Bio/Vote History
         
Goolsbee Austan Goolsbee Chicago Agree 1
Bio/Vote History
         
Greenstone Michael Greenstone Chicago Uncertain 2
Bio/Vote History
         
Hall Robert Hall Stanford Disagree 8
There's almost no support for short-term-ism. And earnings numbers themselves are unimportant. The market values overall prospects.
Bio/Vote History
         
Hart Oliver Hart Harvard Agree 5
I am in favor of letting firms do this but only if it is part of their charter or approved by shareholders. It should not be a blanket rule.
Bio/Vote History
         
Holmström Bengt Holmström MIT Agree 5
No firm evidence, just anecdotal. Not clear there is any better periodicity.
Bio/Vote History
         
Hoxby Caroline Hoxby Stanford Disagree 8
Smart investors are perfectly capable of evaluating firms using a combination of multiple quarterly reports.
Bio/Vote History
         
Hoynes Hilary Hoynes Berkeley Agree 5
Bio/Vote History
         
Judd Kenneth Judd Stanford Strongly Disagree 7
This would increase the information difference between insiders and outsiders. Management would have more time to hide their mistakes.
Bio/Vote History
         
Kaplan Steven Kaplan Chicago Strongly Disagree 8
Two countervailing effects -- perhaps less short-term, but less accountability. The latter is a bigger problem than the former.
Bio/Vote History
         
Kashyap Anil Kashyap Chicago Uncertain 3
It would relieve short term pressure, but not clear that they would necessarily become patient long-term oriented.
Bio/Vote History
         
Klenow Pete Klenow Stanford Agree 5 Bio/Vote History
         
Levin Jonathan Levin Stanford Agree 3
Bio/Vote History
         
Maskin Eric Maskin Harvard Did Not Answer
Bio/Vote History
         
Nordhaus William Nordhaus Yale Agree 3
Assume means requiring. Given all the pressures, unlikely that would be major change, so epsilon effect. They might report anyway.
Bio/Vote History
         
Saez Emmanuel Saez Berkeley Did Not Answer
Bio/Vote History
         
Samuelson Larry Samuelson Yale Agree 6
A year is still too short of a horizon to be confident that executives would appropriately weight long-term issues, which may span decades.
Bio/Vote History
         
Scheinkman José Scheinkman Princeton Disagree 7
Bio/Vote History
         
Schmalensee Richard Schmalensee MIT Agree 2
This is almost trivially true, since there would be no quarter-to-quarter considerations. But it is hard to imagine a big effect.
Bio/Vote History
         
Shapiro Carl Shapiro Berkeley Disagree 3
Bio/Vote History
         
Shimer Robert Shimer Chicago Uncertain 3
Bio/Vote History
         
Thaler Richard Thaler Chicago Agree 4
Recent working paper says yes. http://bit.ly/1HgC0lg
Bio/Vote History
         
Udry Christopher Udry Yale Uncertain 1
Bio/Vote History
         

Question B Participant Responses

Participant University Vote Confidence Comment Bio/Vote History
Acemoglu Daron Acemoglu MIT Uncertain 4
Bio/Vote History
         
Alesina Alberto Alesina Harvard No Opinion
Bio/Vote History
         
Altonji Joseph Altonji Yale Disagree 6
Bio/Vote History
         
Auerbach Alan Auerbach Berkeley Disagree 5
Bio/Vote History
         
Autor David Autor MIT No Opinion
Bio/Vote History
         
Baicker Katherine Baicker Harvard Uncertain 3
Bio/Vote History
         
Banerjee Abhijit Banerjee MIT Agree 7
Bio/Vote History
         
Bertrand Marianne Bertrand Chicago Agree 5
Bio/Vote History
         
Brunnermeier Markus Brunnermeier Princeton Uncertain 5
Bio/Vote History
         
Chetty Raj Chetty Stanford Did Not Answer
Bio/Vote History
         
Chevalier Judith Chevalier Yale Uncertain 5
Bio/Vote History
         
Cutler David Cutler Harvard Uncertain 6
Bio/Vote History
         
Deaton Angus Deaton Princeton No Opinion
Bio/Vote History
         
Duffie Darrell Duffie Stanford Did Not Answer
Bio/Vote History
         
Edlin Aaron Edlin Berkeley Agree 6
Bio/Vote History
         
Eichengreen Barry Eichengreen Berkeley Uncertain 5
Tradeoffs for investors (less transparency for example).
Bio/Vote History
         
Einav Liran Einav Stanford Uncertain 6
Bio/Vote History
         
Fair Ray Fair Yale Disagree 4
Bio/Vote History
         
Finkelstein Amy Finkelstein MIT Did Not Answer
Bio/Vote History
         
Goldberg Pinelopi Goldberg Yale Did Not Answer
Bio/Vote History
         
Goolsbee Austan Goolsbee Chicago Agree 1
Bio/Vote History
         
Greenstone Michael Greenstone Chicago Uncertain 2
Bio/Vote History
         
Hall Robert Hall Stanford Disagree 8
Public markets need certified disclosure regimes. Businesses that are harmed by disclosure should be private.
Bio/Vote History
         
Hart Oliver Hart Harvard Uncertain 10
For some firms it might be better, for others worse. This is not a case where one size fits all.
Bio/Vote History
         
Holmström Bengt Holmström MIT Strongly Disagree 8
One year far too infrequent for well functioning markets.
Bio/Vote History
         
Hoxby Caroline Hoxby Stanford Disagree 7
It is difficult for someone to benefit from being forced to be less informed. There is such a thing as free disposal.
Bio/Vote History
         
Hoynes Hilary Hoynes Berkeley Agree 5
Bio/Vote History
         
Judd Kenneth Judd Stanford Strongly Disagree 7
Bio/Vote History
         
Kaplan Steven Kaplan Chicago Strongly Disagree 10
Perhaps less short-term, but less accountability. Less short-term a minor improvement if any; less accountability a bigger cost.
Bio/Vote History
         
Kashyap Anil Kashyap Chicago Uncertain 3
Very hard to know the net effects, for instance it would become easier to hide bad decisions for longer periods.
Bio/Vote History
         
Klenow Pete Klenow Stanford Uncertain 4
Bio/Vote History
         
Levin Jonathan Levin Stanford Uncertain 3
Bio/Vote History
         
Maskin Eric Maskin Harvard Did Not Answer
Bio/Vote History
         
Nordhaus William Nordhaus Yale Disagree 3
Firms would probably report anyway. If not, would lead to more uncertainty and possibly more volatility. In any case, small effect.
Bio/Vote History
         
Saez Emmanuel Saez Berkeley Did Not Answer
Bio/Vote History
         
Samuelson Larry Samuelson Yale Uncertain 1
The modest push toward better weighting of long-term issues must be balanced against the attendant loss of information and accountability.
Bio/Vote History
         
Scheinkman José Scheinkman Princeton Disagree 7
Bio/Vote History
         
Schmalensee Richard Schmalensee MIT Uncertain 3
Perhaps a touch less short-termism but a lot less timely information. Hard to see a net gain.
Bio/Vote History
         
Shapiro Carl Shapiro Berkeley Disagree 4
Bio/Vote History
         
Shimer Robert Shimer Chicago Disagree 5
Quarterly earnings reports make it easier to monitor managers, even if earnings can be manipulated.
Bio/Vote History
         
Thaler Richard Thaler Chicago Agree 5
Again see http://bit.ly/1HgC0lg
Bio/Vote History
         
Udry Christopher Udry Yale Uncertain 1
Bio/Vote History
         

10 New Economic Experts join the IGM Panel


For the past two years, our expert panelists have been informing the public about the extent to which economists agree or disagree on important public policy issues. This week, we are delighted to announce that we are expanding the IGM Economic Experts Panel to add ten new distinguished economists. Like our other experts, these new panelists have impeccable qualifications to speak on public policy matters, and their names will be familiar to other economists and the media.

To give the public a broad sense of their views on policy issues, each new expert has responded to a selection of 16 statements that our panel had previously addressed. We chose these 16 statements, which cover a wide range of important policy areas, because the original panelists' responses to them were analyzed in a paper comparing the views of our economic experts with those of the American public. You can find that paper, by Paola Sapienza and Luigi Zingales, here. The paper, along with other analyses of the experts' views, was discussed during the American Economic Association annual meetings, and the video can be found here.

The new panelists' responses to these statements can be seen on their individual voting history pages. Our ten new economic experts are:

Abhijit Banerjee (MIT)
Markus K. Brunnermeier (Princeton)
Liran Einav (Stanford)
Amy Finkelstein (MIT)
Oliver Hart (Harvard)
Hilary Hoynes (Berkeley)
Steven N. Kaplan (Chicago)
Larry Samuelson (Yale)
Carl Shapiro (Berkeley)
Robert Shimer (Chicago)


Please note that, for the 16 previous topics on which these new panelists have voted, we left the charts showing the distribution of responses unchanged. Those charts reflect the responses that our original panelists gave at the time, and we have not altered them to reflect the views of the new experts.

We have also taken this opportunity to ask our original panelists whether they would vote differently on any of the statements we have asked about in the past. Several experts chose to highlight statements to which they would currently respond differently. In such cases, you will see this "revote" below the panelist's original vote. We think you will enjoy seeing examples of statements on which some experts have reconsidered.

As with the 16 previous statements voted on by new panelists, these "revote" responses are not reflected in the chart that we display showing the distribution of views for that topic: all the charts for previous questions reflect the distribution of views that the experts expressed when the statement was originally posed.

About the IGM Economic Experts Panel

This panel explores the extent to which economists agree or disagree on major public policy issues. To assess such beliefs we assembled this panel of expert economists. Statistics teaches that a sample of (say) 40 opinions will be adequate to reflect a broader population if the sample is representative of that population.

To that end, our panel was chosen to include distinguished experts with a keen interest in public policy from the major areas of economics, to be geographically diverse, and to include Democrats, Republicans and Independents as well as older and younger scholars. The panel members are all senior faculty at the most elite research universities in the United States. The panel includes Nobel Laureates, John Bates Clark Medalists, fellows of the Econometric society, past Presidents of both the American Economics Association and American Finance Association, past Democratic and Republican members of the President's Council of Economics, and past and current editors of the leading journals in the profession. This selection process has the advantage of not only providing a set of panelists whose names will be familiar to other economists and the media, but also delivers a group with impeccable qualifications to speak on public policy matters.

Finally, it is important to explain one aspect of our voting process. In some instances a panelist may neither agree nor disagree with a statement, and there can be two very different reasons for this. One case occurs when an economist is an expert on a topic and yet sees the evidence on the exact claim at hand as ambiguous. In such cases our panelists vote "uncertain". A second case relates to statements on topics so far removed from the economist's expertise that he or she feels unqualified to vote. In this case, our panelists vote "no opinion".

The Economic Experts Panel questions are emailed individually to the members of the panel, and each responds electronically at his or her convenience. Panelists may consult whatever resources they like before answering.

Members of the public are free to suggest questions (see link below), and the panelists suggest many themselves. Members of the IGM faculty are responsible for deciding the final version of each week’s question. We usually send a draft of the question to the panel in advance, and invite them to point out problems with the wording if they see any. In response, we typically receive a handful of suggested clarifications from individual experts. This process helps us to spot inconsistencies, and to reduce vagueness or problems of interpretation.

The panel data are copyrighted by the Initiative on Global Markets and are being analyzed for an article to appear in a leading peer-reviewed journal.

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