Explaining Corporate Short-Termism? Self-Reinforcing Processes and Biases Among Investors, Media, and Corporate Managers

Aspara, Jaakko; Pajunen, Kalle; Tikkanen, Henrikki; Tainio, Risto

doi:10.2139/ssrn.2016179

Cited by 12 publications

(14 citation statements)

References 165 publications

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“…Firstly, Crotty (2005) advocates that the rise in financial investments (normally in the form of buying financial subsidiaries or expanding an already existing one) has been determined by NFCs' shorter planning horizons which are incompatible with the pursuit of long-term real projects. This short-termism mirrors a tendency among investors to sacrifice long-term investment projects in order to increase short-term profits (Aspara et al, 2014). According to Samuel (2000), this focus on short-term profits instead of long-term expansion reflects a certain 'managerial myopia'.…”

mentioning

confidence: 99%

Financialisation and Real Investment in the European Union: Beneficial or Prejudicial Effects?

Barradas

2017

Review of Political Economy

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confidence: 99%

Financialisation and Real Investment in the European Union: Beneficial or Prejudicial Effects?

Barradas

2017

Review of Political Economy

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“…For example, the cognitive “myopia” of managers can constrain learning from temporally distant outcomes (Diehl and Sterman, ; Levinthal and March, ). Moreover, stakeholders often pressure executives to take actions based on short‐term outcomes, which may be counterproductive if success presupposes patience (Aspara et al ., ). Organizational learning may also be compromised when time delays between decisions and outcomes span beyond the tenures of key decision makers (Paich and Sterman, ).…”

Section: Theoretical Backgroundmentioning

confidence: 97%

Time delays, competitive interdependence, and firm performance

Luoma

Ruutu

King

et al. 2016

Strategic Management Journal

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“…This theoretical position has received empirical support from two types of evidence (Aspara, Pajunen, Tikkanen, & Tainio, 2014;Hughes, 2014). One approach is to look at current share prices and assess how closely they reflect future dividends.…”

Section: Existing Literaturementioning

confidence: 99%

Tracing the connections: short-termism, training and recession

Felstead

2016

The International Journal of Human Resource Management

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It is frequently claimed that some employers act to maximise short-term gains at the expense of long-term rewards, hence reducing the level of employee training. In addition, during a recession such employers are expected to be the keenest to make further cutbacks. This paper examines the empirical validity of these two claims by examining the links between three proxies for short-termism and the incidence and volume of training activity as well as recession-induced changes to training expenditure and the proportion of the workforce trained. The results are based on establishment-level data taken from 67,599 private sector employers in England in 2009 and enriched with data from other sources (with sample sizes falling accordingly). The results suggest that short-termism plays a role in explaining both the level of training activity supported by employers and its sensitivity to the economic cycle. However, the results are rather ambiguous with one of the proxies suggesting that, contrary to theoretical reasoning, training incidence and volume is higher, not lower, in establishments which belong to stock market listed rather than unlisted enterprises. To make further analytical headway, then, direct measures of short-termism are needed rather than indirect, albeit improved, measures of the type used here.

show abstract

Explaining Corporate Short-Termism? Self-Reinforcing Processes and Biases Among Investors, Media, and Corporate Managers

Cited by 12 publications

References 165 publications

Financialisation and Real Investment in the European Union: Beneficial or Prejudicial Effects?

Financialisation and Real Investment in the European Union: Beneficial or Prejudicial Effects?

Time delays, competitive interdependence, and firm performance

Tracing the connections: short-termism, training and recession

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