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Does Short-Termism Influence the Market Value of Companies? Evidence from EU Countries

Author

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  • Małgorzata Janicka

    (Department of International Finance and Investments, Faculty of Economics and Sociology, University of Lodz, Rewolucji 1905 Street 41, 90-255 Lodz, Poland)

  • Aleksandra Pieloch-Babiarz

    (Department of International Finance and Investments, Faculty of Economics and Sociology, University of Lodz, Rewolucji 1905 Street 41, 90-255 Lodz, Poland)

  • Artur Sajnóg

    (Department of International Finance and Investments, Faculty of Economics and Sociology, University of Lodz, Rewolucji 1905 Street 41, 90-255 Lodz, Poland)

Abstract

This paper fits into the stream of current research on the concept of short-termism and its importance for economic sustainability, especially sustainable finance. Short-termism focuses on short time horizons by both corporate managers and the financial markets, and prioritizes short-time shareholder return over the long-term growth of the company’s value. This study engages the short-termism discussion by examining the effect of quarterly reporting on the long-term market value of listed companies. The aim of the article is to determine whether European companies experience the negative effects of short-termism, precisely, whether public companies that prepare quarterly reports, and which focus mainly on achieving the short-term goals of stock exchange investors, are seeing a decline in their market value in the long-term. We have not proven the existence of such a dependence, the increase in reporting frequency of public companies does not contribute to a decline in their long-term market value. In the case of the EU-15 the results of regression model estimation indicate a positive and statistically significant impact of the time of regular quarterly reporting on the buy-and-hold rates of return, in the “new” EU member states this relationship is not observed.

Suggested Citation

  • Małgorzata Janicka & Aleksandra Pieloch-Babiarz & Artur Sajnóg, 2020. "Does Short-Termism Influence the Market Value of Companies? Evidence from EU Countries," JRFM, MDPI, vol. 13(11), pages 1-22, November.
    • Handle: RePEc:gam:jjrfmx:v:13:y:2020:i:11:p:272-:d:440880
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    1. Malgorzata Janicka & Artur Sajnog, 2021. "The European Union’s Environmental Policy and Long-Term Investments of Enterprises," European Research Studies Journal, European Research Studies Journal, vol. 0(4B), pages 335-355.
    2. Weiyu Zhang & Xinyue Li & Shaowei Liu & Jong-wook Kwon, 2023. "The Chairman’s Rural Origin and Short-Term Expenditures in China," Sustainability, MDPI, vol. 15(18), pages 1-20, September.
    3. Małgorzata Janicka & Artur Sajnóg, 2022. "The ESG Reporting of EU Public Companies—Does the Company’s Capitalisation Matter?," Sustainability, MDPI, vol. 14(7), pages 1-17, April.

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