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Short-Termism and Underinvestment: The Influence of Financial Systems

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  • Dickerson, Andrew P
  • Gibson, Heather D
  • Tsakalotos, Euclid

Abstract

This paper contributes to the debate on the existence of short-termism in Anglo-Saxon financial systems. The authors focus on one aspect of short-termism, namely the conflict that can exist between shareholder-owners and managers. Adapting a dynamic model first presented by K. Lancaster (1973), they show that noncooperation between shareholders and managers in the division of profits leads to a suboptimal level of investment. Anglo-Saxon financial markets are characterized by short-term relationships between agents. The implication of the authors' model is that institutional reforms promoting more long-term, cooperative, relationships may provide one mechanism in alleviating short-termism. Copyright 1995 by Blackwell Publishers Ltd and The Victoria University of Manchester

Suggested Citation

  • Dickerson, Andrew P & Gibson, Heather D & Tsakalotos, Euclid, 1995. "Short-Termism and Underinvestment: The Influence of Financial Systems," The Manchester School of Economic & Social Studies, University of Manchester, vol. 63(4), pages 351-367, December.
    • Handle: RePEc:bla:manch2:v:63:y:1995:i:4:p:351-67
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    Cited by:

    1. McSweeney, Brendan, 2009. "The roles of financial asset market failure denial and the economic crisis: Reflections on accounting and financial theories and practices," Accounting, Organizations and Society, Elsevier, vol. 34(6-7), pages 835-848, August.
    2. Ivan V. Rozmainsky, 2015. "Investor myopia and persistence of the global crisis- a post Keynesian view," Montenegrin Journal of Economics, Economic Laboratory for Transition Research (ELIT), vol. 11(1), pages 107-116.

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