Real economy effects of short-term equity ownership
Tóm tắt
Investor time horizon varies by company, industry and economic system. In this article we explore the importance of this variation by studying the impact of shareholder time horizon on the investment decisions of the firms they own, and externalities on the wider market. We demonstrate theoretically that short-term shareholders cause Boards to care about the path of the stock price, rationalising firms’ pursuit of investments for signalling reasons at the expense of long-term value. We demonstrate that short-termism has spillover effects, leading to higher costs of equity capital; bubbles in the price of input assets; and predictable excess returns. We build testable cross-country hypotheses and evaluate these using existing evidence coupled with a new dataset on owner duration of US and Germanic firms.
Tài liệu tham khảo
Albagli, E., Hellwig, C., & Tsyvinski, A. 2011. A theory of asset prices based on heterogeneous information. Working Paper: National Bureau of Economic Research.
Allen, F., & Gale, D. 2000. Bubbles and crises. The Economic Journal, 110 (460): 236–255.
Allen, F., & Gale, D. 2009. Understanding Financial Crises: Clarendon Lectures in Finance. Oxford: Oxford University Press.
Allen, F., Morris, S., & Postlewaite, A. 1993. Finite bubbles with short sale constraints and asymmetric information. Journal of Economic Theory, 61 (2): 206–229.
Anderson, R. C., Duru, A., & Reeb, D. M. 2012. Investment policy in family controlled firms. Journal of Banking & Finance, 36 (6): 1744–1758.
Anderson, R. C., & Reeb, D. M. 2003. Founding-family ownership and firm performance: Evidence from the P 500. Journal of Finance, 58 (3): 1301–1327.
Andrade, G., Mitchell, M., & Stafford, E. 2001. New evidence and perspectives on mergers. Journal of Eonomic Perspectives, 15 (2): 103–120.
Antia, M., Pantzalis, C., & Park, J. C. 2010. CEO decision horizon and firm performance: An empirical investigation. Journal of Corporate Finance, 16 (3): 288–301.
Aspen Institute. 2009. Overcoming short-termism: A call for a more responsible approach to investment and business management. Technical report, Aspen Institute, Business and Society Program.
Barber, B. M., & Lyon, J. D. 1997. Detecting long-run abnormal stock returns: The empirical power and specification of test statistics. Journal of Financial Economics, 43 (3): 341–372.
Bebchuk, L. A., Brav, A., & Jiang, W. 2015. The long-term effects of hedge fund activism. Columbia Law Review, 114 (5): 13–66.
Bebchuk, L. A., & Stole, L. A. 1993. Do short-term objectives lead to under- or overinvestment in long-term projects? Journal of Finance, 48 (2): 719–730.
Berle, A. A., & Means, G. C. 1933. The Modern Corporation and Private Property. New York: Palgrave Macmillan.
Black, A., & Fraser, P. 2002. Stock market short-termism – An international perspective. Journal of Multinational Financial Management, 12 (2): 135–158.
Bolton, P., Scheinkman, J., & Xiong, W. 2006. Executive compensation and shorttermist behaviour in speculative markets. Review of Economic Studies, 73 (3): 577–610.
Botosan, C. 1997. Disclosure level and the cost of equity capital. Accounting Review, 72 (3): 323–350.
Bühner, R. 1991. The success of mergers in Germany. International Journal of Industrial Organization, 9 (4): 513–532.
Campbell, T. S., & Marino, A. M. 1994. Myopic investment decisions and competitive labor markets. International Economic Review, 35 (4): 855–875.
Chomsisengphet, S., & Pennington-Cross, A. 2006. The evolution of the subprime mortgage market. Federal Reserve Bank of St. Louis Review, 88 (1): 31–56.
Claessens, S., Djankova, S., & Lang, L. H. 2000. The separation of ownership and control in East Asian corporations. Journal of Financial Economics, 58 (1–2): 81–112.
DeAngelo, H. 1981. Competition and unanimity. American Economic Review, 71 (1): 18–27.
Derrien, F., Kecskés, A., & Thesmar, D. 2013. Investor horizons and corporate policies. Journal of Financial and Quantitative Analysis, 48 (6): 1755–1780.
Deutsche Bank. 2007. Global CDO market: Overview and outlook – Global Securitisation and Structured Finance.
Faccio, M., & Lang, L. H. 2002. The ultimate ownership of Western European corporations. Journal of Financial Economics, 65 (3): 365–395.
Fama, E. F., & French, K. R. 1997. Industry costs of equity. Journal of Financial Economics, 43 (2): 153–193.
Financial Crisis Inquiry Commission. 2011. Financial crisis inquiry report. Technical report, US Government, http://www.gpo.gov/fdsys/pkg/GPOFCIC/pdf/GPO-FCIC.pdf, accessed 26 August 2014.
Foucault, T., & Laurent, F. 2014. Learning from peers’ stock prices and corporate investment. Journal of Financial Economics, 111 (3): 554–577.
Gaspar, J.-M., Massa, M., & Matos, P. 2005. Shareholder investment horizons and the market for corporate control. Journal of Financial Economics, 76 (1): 135–165.
Gebhardt, W. R., Lee, C. M. C., & Swaminathan, B. 2001. Toward an implied cost of capital. Journal of Accounting Research, 39 (1): 135–176.
Goergen, M., & Renneboog, L. 2004. Shareholder wealth effects of European domestic and cross-border takeover bids. European Financial Management, 10 (1): 9–45.
Graham, J., Harvey, C., & Rajgopal, S. 2005. The economic implications of corporate financial reporting. Journal of Accounting and Economics, 40 (1–3): 3–73.
Hillier, D., Pindado, J., de Queiroz, V., & de la Torre, C. 2011. The impact of country-level corporate governance on research and development. Journal of International Business Studies, 42 (1): 76–98.
Holderness, C. 2009. The myth of diffuse ownership in the united states. Review of Financial Studies, 22 (4): 1377–1408.
Jensen, M. C., & Ruback, R. S. 1983. The market for corporate control: The scientific evidence. Journal of Financial Economics, 11 (1–4): 5–50.
John, K., Litov, L., & Yeung, B. 2008. Corporate governance and risk taking. Journal of Finance, 63 (4): 1679–1728.
Kay, J. 2012. The Kay review of UK equity markets and long term decision making. Technical report, UK Department of Business, Innovation and Skills.
Kothari, S., & Warner, J. B. 1997. Measuring long-horizon security price performance. Journal of Financial Economics, 43 (3): 301–339.
Kumar, P., & Langberg, N. 2009. Corporate fraud and investment distortions in efficient capital markets. The RAND Journal of Economics, 40 (1): 144–172.
La Porta, R., de Silanes, F. L., Shleifer, A., & Vishny, R. 1998. Law and finance. Journal of Political Economy, 106 (6): 1113–1155.
Lambert, R., Leuz, C., & Verrecchia, R. E. 2007. Accounting information, disclosure, and the cost of capital. Journal of Accounting Research, 45 (2): 385–420.
Lambert, R., Leuz, C., & Verrecchia, R. E. 2012. Information asymmetry, information precision, and the cost of capital. Review of Finance, 16 (1): 1–29.
Lamont, O. A. 2012. Go down fighting: Short sellers vs. firms. The Review of Asset Pricing Studies, 2 (1): 1–30.
Laux, C. 2012. Financial instruments, financial reporting, and financial stability. Accounting and Business Research, 42 (3): 239–260.
Loughran, T., & Vijh, A. M. 1997. Do long-term shareholders benefit from corporate acquisitions? The Journal of Finance, 52 (5): 1765–1790.
Mannix, E. A., & Loewenstein, G. F. 1994. The effects of interfirm mobility and individual versus group decision making on managerial time horizons. Organizational Behavior and Human Decision Processes, 59 (3): 371–390.
Martynova, M., & Renneboog, L. 2006. Mergers and acquisitions in Europe. In L. Renneboog Ed, Advances in Corporate Finance and Asset Pricing. Chapter 2: 15–75. Elsevier: Amsterdam.
Mitchell, M., Pulvino, T., & Stafford, E. 2004. Price pressure around mergers. The Journal of Finance, 59 (1): 31–63.
Porter, M. E. 1992. Capital disadvantage: America’s failing capital investment system. Harvard Business Review, 70 (5): 65–82.
Shao, L., Kwok, C. C. Y., & Zhang, R. 2013. National culture and corporate investment. Journal of International Business Studies, 44 (7): 745–763.
Stein, J. C. 1989. Efficient capital markets, inefficient firms: A model of myopic corporate behavior. The Quarterly Journal of Economics, 104 (4): 655–669.
Strobl, G. 2013. Earnings manipulation and the cost of capital. Journal of Accounting Research, 51 (2): 449–473.
Thanassoulis, J. 2013. Industry structure, executive pay, and short-termism. Management Science, 59 (2): 402–419.
Zahra, S. A. 1996. Goverance, ownership, and corporate entrepreneurship: The moderating impact of industry technological opportunities. Academy of Management Journal, 39 (6): 1713–1735.