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Are US Companies Too Short-Term Oriented? Some Thoughts

In: Innovation Policy and the Economy, Volume 18

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  • Steven N. Kaplan

Abstract

U.S. companies are often criticized for being overly short-term oriented. This paper documents that those criticisms have a long history, going back at least thirty-five years. The paper then considers the implications of sustained short-termism for corporate profits, venture capital investments and returns, private equity investments and returns, and corporate valuations. The paper finds little long-term evidence that is consistent with the predictions of the short-term critics.
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Suggested Citation

  • Steven N. Kaplan, 2017. "Are US Companies Too Short-Term Oriented? Some Thoughts," NBER Chapters, in: Innovation Policy and the Economy, Volume 18, pages 107-124, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberch:13933
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    References listed on IDEAS

    as
    1. Steven N. Kaplan & Antoinette Schoar, 2005. "Private Equity Performance: Returns, Persistence, and Capital Flows," Journal of Finance, American Finance Association, vol. 60(4), pages 1791-1823, August.
    2. Fama, Eugene F. & French, Kenneth R., 2004. "New lists: Fundamentals and survival rates," Journal of Financial Economics, Elsevier, vol. 73(2), pages 229-269, August.
    3. Steven N. Kaplan & Josh Lerner, 2010. "It Ain't Broke: The Past, Present, and Future of Venture Capital," Journal of Applied Corporate Finance, Morgan Stanley, vol. 22(2), pages 36-47, April.
    4. Robert S. Harris & Tim Jenkinson & Steven N. Kaplan, 2014. "Private Equity Performance: What Do We Know?," Journal of Finance, American Finance Association, vol. 69(5), pages 1851-1882, October.
    5. Sahlman, William A., 1990. "The structure and governance of venture-capital organizations," Journal of Financial Economics, Elsevier, vol. 27(2), pages 473-521, October.
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    Cited by:

    1. Mariassunta Giannetti & Xiaoyun Yu, 2021. "Adapting to Radical Change: The Benefits of Short-Horizon Investors," Management Science, INFORMS, vol. 67(7), pages 4032-4055, July.
    2. Margaret K. Kyle, 2019. "The Alignment of Innovation Policy and Social Welfare: Evidence from Pharmaceuticals," NBER Chapters, in: Innovation Policy and the Economy, Volume 20, pages 95-123, National Bureau of Economic Research, Inc.
    3. Elsabé Keyser & Samson Adeoluwa Adewumi & Rochelle Fourie, 2020. "Environmental Factors and Affective Well-Being Influence on Mine Workers Absenteeism in South Africa," European Journal of Interdisciplinary Studies Articles, Revistia Research and Publishing, vol. 6, ejis_v6_i.
    4. Fos, Vyacheslav & Almeida, Heitor & Ersahin, Nuri & Irani, Rustom M & ,, 2019. "Do Short-Term Incentives Affect Long-Term Productivity?," CEPR Discussion Papers 13894, C.E.P.R. Discussion Papers.
    5. Autore, Don M. & Clarke, Nicholas & Liu, Baixiao, 2019. "Activist investors and open market share repurchases," Journal of Banking & Finance, Elsevier, vol. 107(C), pages 1-1.
    6. Drobetz, W. & Momtaz, Paul P., 2020. "Antitakeover Provisions and Firm Value: New Evidence from the M&A Market," Journal of Corporate Finance, Elsevier, vol. 62(C).
    7. Achilles, Catrina & Limbach, Peter & Wolff, Michael & Yoon, Aaron, 2024. "Inside the blackbox of firm environmental efforts: Evidence from emissions reduction initiatives," CFR Working Papers 24-05, University of Cologne, Centre for Financial Research (CFR).
    8. Apergis, Nicholas & Gangopadhyay, Partha, 2020. "The asymmetric relationships between pollution, energy use and oil prices in Vietnam: Some behavioural implications for energy policy-making," Energy Policy, Elsevier, vol. 140(C).

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    More about this item

    JEL classification:

    • G3 - Financial Economics - - Corporate Finance and Governance
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance

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