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A survey of corporate perceptions of short-termism among analysts and fund managers

Author

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  • C. L. Marston
  • B. M. Craven

Abstract

There is a popularly held view that institutional investors and stockbrokers' analysts take a short-term view when making or advising on investment decisions. Short-termism is held to be a particular problem for economies such as the US and the UK which rely heavily on stock exchanges to price securities and help reallocate resources through take-over. This is deemed to be detrimental to long-term corporate development and overall economic growth. The paper seeks to show the extent to which directors of large UK companies perceive that analysts and institutional investors evaluate their companies on short-term criteria. The role of institutional investors in the context of short-termism is important because they own a large proportion of equity. The paper then seeks to explain why some company directors appear to believe in short-termism while others do not. Hence the paper is not investigating whether 'the City' is short-termist but is examining the reasons why directors of large publicly quoted companies believe 'the City' is or is not short-termist about their company. The conclusion of this paper is that there is some evidence to support the view that 'the City' is perceived as being short-termist towards some companies but that the phenomenon is more narrowly focused and of lesser importance than its supporters claim.

Suggested Citation

  • C. L. Marston & B. M. Craven, 1998. "A survey of corporate perceptions of short-termism among analysts and fund managers," The European Journal of Finance, Taylor & Francis Journals, vol. 4(3), pages 233-256.
    • Handle: RePEc:taf:eurjfi:v:4:y:1998:i:3:p:233-256
    DOI: 10.1080/135184798337281
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    Citations

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    Cited by:

    1. Jang, Bong-Gyu & Park, Seyoung, 2016. "Ambiguity and optimal portfolio choice with Value-at-Risk constraint," Finance Research Letters, Elsevier, vol. 18(C), pages 158-176.
    2. Lukas Menkhoff, 2002. "Institutional Investors: The External Costs of a Successful Innovation," Journal of Economic Issues, Taylor & Francis Journals, vol. 36(4), pages 907-933, December.
    3. Yves Mard, 2003. "Performance Comptable Et Gestion Des Resultats," Post-Print halshs-00582798, HAL.
    4. Lukas Menkhoff & Ulrich Schmidt, 2005. "The use of trading strategies by fund managers: some first survey evidence," Applied Economics, Taylor & Francis Journals, vol. 37(15), pages 1719-1730.
    5. Roberts, John & Sanderson, Paul & Barker, Richard & Hendry, John, 2006. "In the mirror of the market: The disciplinary effects of company/fund manager meetings," Accounting, Organizations and Society, Elsevier, vol. 31(3), pages 277-294, April.
    6. Ng, Artie W. & Nathwani, Jatin, 2012. "Sustainability performance disclosures: The case of independent power producers," Renewable and Sustainable Energy Reviews, Elsevier, vol. 16(4), pages 1940-1948.
    7. Malsch, Bertrand & Gendron, Yves, 2009. "Mythical representations of trust in auditors and the preservation of social order in the financial community," CRITICAL PERSPECTIVES ON ACCOUNTING, Elsevier, vol. 20(6), pages 735-750.
    8. Alan Hughes, 2014. "Short-Termism, Impatient Capital and Finance for Manufacturing Innovation in the UK," Working Papers wp457, Centre for Business Research, University of Cambridge.
    9. Alain Bensoussan & Bong-Gyu Jang & Seyoung Park, 2016. "Unemployment Risks and Optimal Retirement in an Incomplete Market," Operations Research, INFORMS, vol. 64(4), pages 1015-1032, August.
    10. Ramzi Benkraiem, 2006. "Performance sectorielle relative et gestion du résultat comptable," Post-Print halshs-00558248, HAL.

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