Short-Term Shareholders, Bubbles, And CEO Myopia
AbstractThis paper analyses the real economy effects of firms having some shareholders with a short investment horizon on their shareholder register.� Short-term shareholders cause management to be concerned with the path of the share price as well as its ultimate value.� Such shareholders in an economy lead to bubbles in the prices of key inputs, to the misallocation of firms to risky business models, and to increased costs of capital.� For individual firms short-term shareholders induce the Board to reduce deferred incentives in CEO pay prompting CEO myopia and reduced investments in the long-run capabilities of the firm.
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Bibliographic InfoPaper provided by University of Oxford, Department of Economics in its series Economics Series Working Papers with number 663.
Date of creation: 04 Jul 2013
Date of revision:
Investor time-horrizons; bubbles; CEO compensation; cost of capital; short-termism; bonuses; shareholder register;
Find related papers by JEL classification:
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
- G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
- L21 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Business Objectives of the Firm
- L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-07-28 (All new papers)
- NEP-BEC-2013-07-28 (Business Economics)
- NEP-HRM-2013-07-28 (Human Capital & Human Resource Management)
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