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Short-Termism and Capital Flows

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  • Jesse M Fried
  • Charles C Y Wang

Abstract

From 2007 to 2016, S&P 500 firms distributed $7 trillion via buybacks and dividends, over 96% of their aggregate net income, prompting claims that “short-termism” is impairing firms’ ability to invest and innovate. We show that, accounting for both direct and indirect equity issuances, net shareholder payouts by all public firms during this period totaled only 41% of net income. And, during this decade, investment substantially increased while cash balances ballooned. In short, S&P 500 shareholder-payout figures cannot provide much basis for the notion that short-termism has been depriving public firms of needed capital.Received September 23, 2018; Editorial decision November 13, 2018; Editor Andrew Ellul

Suggested Citation

  • Jesse M Fried & Charles C Y Wang, 2019. "Short-Termism and Capital Flows," The Review of Corporate Finance Studies, Society for Financial Studies, vol. 8(1), pages 207-233.
  • Handle: RePEc:oup:rcorpf:v:8:y:2019:i:1:p:207-233.
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    File URL: http://hdl.handle.net/10.1093/rcfs/cfy011
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    Cited by:

    1. Mario Vaupel & David Bendig & Denise Fischer-Kreer & Malte Brettel, 2023. "The Role of Share Repurchases for Firms’ Social and Environmental Sustainability," Journal of Business Ethics, Springer, vol. 183(2), pages 401-428, March.
    2. Kathryn E. Easterday & Pradyot K. Sen, 2023. "Another look at the dividend-price relationship in the accounting valuation framework," Review of Quantitative Finance and Accounting, Springer, vol. 61(3), pages 879-925, October.
    3. Jessie Jiaxu Wang, 2023. "Workplace Automation and Corporate Liquidity Policy," Finance and Economics Discussion Series 2023-023, Board of Governors of the Federal Reserve System (U.S.).

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