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Real economy effects of short-term equity ownership
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Thanassoulis, John and Somekhy, Babak (2015) Real economy effects of short-term equity ownership. Journal of International Business Studies, 47 (2). pp. 233-254. doi:10.1057/jibs.2015.41 ISSN 0047-2506.
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Official URL: http://dx.doi.org/10.1057/jibs.2015.41
Abstract
Investor time horizon varies by company, industry and economic system. In this paper we explore the importance of this variation by studying the impact of shareholder time horizon on the investment decisions of the rms they own, and externalities on the wider market. We demonstrate theoretically that short-term shareholders cause Boards to care about the path of the stock price, rationalising rms' pursuit of investments for signalling reasons at the expense of long-term value. We demonstrate that short-termism has spillover effects, leading to higher costs of equity capital; bubbles in the price of input assets; and predictable excess returns. We build testable cross-country hypotheses and evaluate these using existing evidence coupled with a new dataset on owner duration of U.S. and Germanic rms.
| Item Type: | Journal Article | ||||||||
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| Alternative Title: | |||||||||
| Subjects: | H Social Sciences > HG Finance | ||||||||
| Divisions: | Faculty of Social Sciences > Warwick Business School | ||||||||
| Library of Congress Subject Headings (LCSH): | Stockholders , Capital , Assets (Accounting) -- Prices, Liquidity (Economics) | ||||||||
| Journal or Publication Title: | Journal of International Business Studies | ||||||||
| Publisher: | Palgrave Macmillan Ltd. | ||||||||
| ISSN: | 0047-2506 | ||||||||
| Official Date: | 17 December 2015 | ||||||||
| Dates: |
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| Volume: | 47 | ||||||||
| Number: | 2 | ||||||||
| Number of Pages: | 36 | ||||||||
| Page Range: | pp. 233-254 | ||||||||
| DOI: | 10.1057/jibs.2015.41 | ||||||||
| Status: | Peer Reviewed | ||||||||
| Publication Status: | Published | ||||||||
| Access rights to Published version: | Restricted or Subscription Access | ||||||||
| Date of first compliant deposit: | 25 May 2016 | ||||||||
| Date of first compliant Open Access: | 17 December 2016 | ||||||||
| Related URLs: |
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