Say you owned an apartment building in a sketchy neighborhood, and your property manager proposed you limit visits to monitor the asset from your regular three-month cadence to every six months. Would you invest more in the property or sell it?

This isn’t a far-fetched metaphor for considering the Securities and Exchange Commission’s proposal to amend the quarterly reporting requirement. While this might be a good idea for a small set of companies, it’s likely a bad idea for most, especially for banks.

Since 1970, U.S. companies have been required to file three 10Qs, or quarterly reports, a year and one 10K, or annual report. These are detailed documents. The most recent 10Q for Capital One Financial runs 140 pages. The Nasdaq stock exchange, which favors the SEC proposal, says total SEC compliance costs are about $9 billion per year, citing outside experts.

IPO or Private Equity?

SEC Chair Paul Atkins says the proposal will make “IPOs Great Again.’’ President Donald Trump in a Truth Social post claimed short-term thinking results from quarterly reporting. Let’s take a close look at those arguments.

The paucity of IPOs largely reflects growth in the available pools of private equity capital. Capital raised through IPOs totaled $44 billion last year, Nasdaq says. By comparison, private equity investment in the U.S. last year was $1.1 trillion, according to KPMG, and venture capital firms invested $320 billion, according to the National Venture Capital Association.

The availability of private equity funding doesn’t explain all of the IPO-private equity difference. Early-stage venture-funded companies, many of which have ongoing losses, aren’t suited for public markets and wouldn’t attempt IPOs even if private equity funding were scarce.

The costs of certain SEC regulations partially play a role in the preference for private equity. The SEC’s rollback of its climate rule is likely to be a major positive for encouraging IPOs. But the reporting cadence cannot create a very important regulatory barrier to going public. Public firms produce monthly accounts, whether or not those are shared publicly, raising questions about whether six-month reporting will be much of a cost saving.

Short-term Focus

President Trump’s concern’s about short-termism is contested by research looking at the investment behavior of U.K. companies where semi-annual reporting was permitted in 2014. Contrary to the short-termism argument, the change had no effect on capital investment.

There are cases where six-month reporting might be beneficial as a cost saving. For example, reducing the compliance burden for small companies or predictable businesses, such as utilities, might make sense. Material changes, such as an FDA approval of a drug or a merger, would still have to be reported out to shareholders in a timely way.

However, for most, there could be large costs associated with reduced transparency. Returning to our opening metaphor: Having less information about an asset at risk may make you want to sell. But here’s the rub: the seller would likely have to accept a price discount to reflect reduced disclosure. High-frequency transparency raises the value of risk assets because it reduces uncertainty.

Creditors Will Want More

Dorothy Lund, a professor at Columbia Law School who studies corporate governance and securities law, believes first movers to six-month reporting would likely see their stock values penalized relative to peer companies. What’s more, she says, creditors will balk. They can write bond or loan covenants that require three-month updates, creating new potential for information asymmetry between debt and stockholders.

Finally, “this puts so much pressure on your semi-annual reporting,’’ she notes. “If a company misses earnings estimates in the first six months, there is no disclosure opportunity for another six months.”

Complex Risks Require Transparency

There is one sector of the stock market where less transparency would be misaligned with the rapid potential changes in the risks the companies take: banks and financial institutions. Even though the United Kingdom has a six-month reporting option, most of its large banks “voluntarily choose to release quarterly updates’’ to align with international standards and meet investor demands, the Financial Conduct Authority said in response to an email.

A good example of why high-frequency transparency is beneficial comes from Capital One Financial Corp. The war in Iran caused a sell-off in consumer finance stocks and bonds. The spreads on Capital One’s 5-year credit default swaps jumped from about 71 basis points at the end of February to 80 basis points a month later.

The worry was that higher oil prices will eat up consumer income resulting in more loan delinquencies, but something surprising happened in Capital One’s first-quarter report. Delinquency rates fell on credit cards and auto loans.

“So far, we’ve not seen any adverse effects on our portfolio, either in our credit or in our spend metrics,’’ Richard Fairbank, the chief executive officer told analysts on the April 21 first-quarter earnings call.

The company’s 5-year credit default swaps now trade at about 66.

Reducing compliance costs for companies large or small is an admirable task for any government agency. However, reducing transparency has unexpected costs of its own. While companies might save on accounting and legal fees, their stocks could suffer a discount if they choose the six-month option.