In July 2020, the European Commission published the “Study on directors’ duties and sustainable corporate governance” by EY. The Report purports to find evidence of debilitating short-termism in EU corporate governance and...
This paper links the CEO’s concerns for the current stock price to reductions in real investment. We identify short-term concerns using the amount of stock and options scheduled to vest in a given quarter. A one standard deviation...
We present a model where firms compete for scarce managerial talent ("alpha") and managers are risk-averse. When managers cannot move across firms after being hired, employers learn about their talent, allocate them efficiently to...
We show that following shocks that change an industry’s competitive environment, firms with more shortterm institutional investors experience smaller drops in sales and investment and have better long-term performance than...
During 2007-2016, S&P 500 firms distributed to shareholders $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...
This paper looks at shareholder activism from the perspective of the revision of the EU Shareholder Rights Directive, which was approved by the European Parliament on 14 March 2017. The main findings are as follows. First, the...
We model blockholder governance as a sequential process, from less hostile private intervention, to confrontational public intervention, and finally exit. When the blockholder faces short-term incentives, the threat of public...
This paper studies the long-term consequences of actions induced by vesting equity, a measure of short-term concerns. Vesting equity is positively associated with the probability of a firm repurchasing shares, the amount of...
This paper studies incentives in a dynamic contracting framework of a levered firm. In particular, the manager selects long-term and short-term efforts, while shareholders choose initially optimal leverage and ex-post optimal...
We use the reform process of the Sarbanes-Oxley Act of 2002 as a quasi-natural experiment to identify the impact of corporate governance reform on foreign exchange risk hedging, and find that the substantial improvements in governance...
Stock-market–driven short-termism is crippling the American economy, according to legal, judicial, and media analyses. Firms forgo the R&D they need, cut capital spending, and buy back their own stock so feverishly that they...
The big corporate governance debates nowadays concern the corporation’s time horizons, and the balance of power between shareholders and managers. In response to actual and anticipated pressure from shareholder activists –...