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Peer performance and short-termism: evidence from green patenting activities

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  • William Mbanyele
  • Hongyun Huang
  • Linda Tinofirei Muchenje

Abstract

Theory and empirical evidence suggest short-termism endangers long-term corporate performance and economic growth. However, little is known about whether and how short-termism impacts the environment and society. Exploiting competitors’ idiosyncratic stock performance as an exogenous short-term peer return variation, we document that firms adjust their green innovation productivity downwards in response to higher short-term peer returns. We also document that higher peer short-term performance provides strong incentives for short-termism as firms strategically cut their R&D and SG&A expenditure to boost their short-term performance. Overall, our study documents the negative externalities that near-term returns can impose on competitors’ investment decisions.

Suggested Citation

  • William Mbanyele & Hongyun Huang & Linda Tinofirei Muchenje, 2024. "Peer performance and short-termism: evidence from green patenting activities," Applied Economics Letters, Taylor & Francis Journals, vol. 31(17), pages 1640-1644, October.
    • Handle: RePEc:taf:apeclt:v:31:y:2024:i:17:p:1640-1644
    DOI: 10.1080/13504851.2023.2205088
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