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Short-Term Shareholders, Bubbles, And CEO Myopia

  • John Thanassoulis

This 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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File URL: http://www.economics.ox.ac.uk/materials/papers/12773/paper663.pdf
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Paper provided by University of Oxford, Department of Economics in its series Economics Series Working Papers with number 663.

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Date of creation: 04 Jul 2013
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Handle: RePEc:oxf:wpaper:663
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  20. John Thanassoulis, 2013. "Industry Structure, Executive Pay, and Short-Termism," Management Science, INFORMS, vol. 59(2), pages 402-419, June.
  21. Bebchuk, Lucian Arye & Stole, Lars A, 1993. " Do Short-Term Objectives Lead to Under- or Overinvestment in Long-Term Projects?," Journal of Finance, American Finance Association, vol. 48(2), pages 719-29, June.
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