The Macro Impact of Short-Termism

• 成果类型: Article
• 署名作者: Terry, Stephen J.
• 署名单位: University of Michigan System; University of Michigan; National Bureau of Economic Research
• 刊物名称: ECONOMETRICA
• ISSN/ISSBN: 0012-9682
• DOI: 10.3982/ECTA15420
• 发表日期: 2023
• 页码: 1881-1912
• 关键词: earnings management; ceo turnover; real; INVESTMENT; incentives; COSTS; MODEL; FIRMS; Dividends; ECONOMICS

摘要

R&D investment reduces current profits, so short-term pressure to hit profit targets may distort R&D. In the data, firms just meeting Wall Street forecasts have lower R&D growth and subsequent innovation, while managers just missing receive lower pay. But short-termist distortions might not quantitatively matter if aggregation or equilibrium dampen their impact. So I build and estimate a quantitative endogenous growth model in which short-termism arises naturally as discipline on conflicted managers and boosts firm value by about 1%. But short-termism reduces R&D, and the social return to R&D is higher than the private return due to standard channels including knowledge spillovers and imperfect competition. So at the macro level, short-termist distortions slow growth by 5 basis points yearly and lower social welfare by about 1%.