Companies often hold back spending on technology, hiring and research and development to meet quarterly earnings guidance that may be affected by factors outside the company's control, they wrote.
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(FILES) This file photo taken on September 12, 2016 shows Jamie Dimon, chairman and CEO of JPMorgan Chase at the Economic Club of Washington, DC in Washington, DC.
Dimon has blasted excessive reporting requirements and the short-term focus of quarterly earnings. An outsized emphasis on quarterly earnings per share projections undermines the importance of investments in infrastructure, workforce development and other crucial capital expenditures that drive sustained US economic growth. Last month, he said the goal is to challenge the entire healthcare industry, not individual segments. Missing "the number" can often result in big, short-term stock moves. In contrast, results that fall shy of market forecasts often cause the stock price to fall.More news: Rashford shines as England cruise past Costa Rica
However, those favouring the practice vouch that it improves communications with Wall Street, reduces share price volatility and boosts a stock's value, the report said.
The two executives said on CNBC Thursday that companies that focus on hitting their quarterly numbers may do things that hurt them in the future, such as delaying investments or changing when certain gains are recorded.
"It can put a company in a position where management from the CEO down feels obligated to deliver earnings, and therefore may do things that they wouldn't otherwise have done", Dimon said.
Buffett and Dimon also blamed the practice for contributing to the decline in the number of public companies in the US over the past 20 years. "Short-term-oriented capital markets have discouraged companies with a longer-term view from going public at all, depriving the economy of innovation and opportunity", they said.
The top executives, however, admitted that reducing or eliminating guidance won't alone eliminate all short-term performance pressures.