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Measuring the costs of short-termism

Author

Listed:
  • Davies, Richard
  • Haldane, Andrew G.
  • Nielsen, Mette
  • Pezzini, Silvia

Abstract

A potential cost of modern capital markets is short-termism, with agents in the financial intermediation chain weighing near-term outcomes too heavily at the expense of longer-term opportunities and thus forgoing valuable investment projects and potential output. This paper sets out an analytical framework and empirical estimates of the potential costs of short-termism arising from distortions to the cost of capital and investment intentions.

Suggested Citation

  • Davies, Richard & Haldane, Andrew G. & Nielsen, Mette & Pezzini, Silvia, 2014. "Measuring the costs of short-termism," Journal of Financial Stability, Elsevier, vol. 12(C), pages 16-25.
  • Handle: RePEc:eee:finsta:v:12:y:2014:i:c:p:16-25
    DOI: 10.1016/j.jfs.2013.07.002
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    References listed on IDEAS

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    Cited by:

    1. repec:oup:oxford:v:33:y:2017:i:1:p:24-48. is not listed on IDEAS
    2. Delis, Manthos D. & Karavias, Yiannis, 2015. "Optimal versus realized bank credit risk and monetary policy," Journal of Financial Stability, Elsevier, vol. 16(C), pages 13-30.
    3. Dirk Schoenmaker, 2017. "Investing for the common good: a sustainable finance framework," Essays and Lectures 21249, Bruegel.
    4. repec:gam:jsusta:v:8:y:2016:i:3:p:280:d:66034 is not listed on IDEAS
    5. repec:eee:finsta:v:32:y:2017:i:c:p:17-29 is not listed on IDEAS
    6. Hiona Balfoussia & Heather D. Gibson, 2016. "Firm investment and financial conditions in the euro area: evidence from firm-level data," Working Papers 208, Bank of Greece.
    7. Marian Buil & Juan Pedro Aznar & Jorge Galiana & Alba Rocafort-Marco, 2016. "An Explanatory Study of MBA Students with Regards to Sustainability and Ethics Commitment," Sustainability, MDPI, Open Access Journal, vol. 8(3), pages 1-13, March.
    8. Palea, Vera & Biancone, Paolo Pietro, 2017. "Which Accounting Rules for Economic and Social Sustainable Development? Engaging Critically with IFRS Adoption in the EU," Department of Economics and Statistics Cognetti de Martiis. Working Papers 201733, University of Turin.
    9. Robert Rieg, 2015. "Dynamics of value-based management: does shareholder value cause short-termism?," Journal of Management Control: Zeitschrift für Planung und Unternehmenssteuerung, Springer, vol. 26(2), pages 193-224, August.
    10. Anindya Chakrabarty & Anupam De & Gautam Bandyopadhyay, 2016. "Horizon heterogeneity, institutional constraint and managerial myopia: a multi-frequency perspective on ELSS," International Journal of Business Excellence, Inderscience Enterprises Ltd, vol. 9(1), pages 18-47.
    11. Pedro Verga Matos & Miguel Coelho, 2016. "Short-Termism In Euronext Lisbon: An Empirical Analysis," Portuguese Journal of Management Studies, ISEG, Universidade de Lisboa, vol. 21(1), pages 49-76.
    12. Yue Chen & Lingxiang Li & Haizhi Wang & Peng Wang, 2015. "Institutional investors and conservative financial reporting: evidence from China," Eurasian Economic Review, Springer;Eurasia Business and Economics Society, vol. 5(1), pages 161-178, June.

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    Keywords

    Financial economics; Investment;

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