How Do Short-Term Incentives Affect Long-Term Productivity?

• 成果类型: Article; Early Access
• 署名作者: Almeida, Heitor; Ersahin, Nuri; Fos, Vyacheslav; Irani, Rustom M.; Kronlund, Mathias
• 署名单位: University of Illinois System; University of Illinois Urbana-Champaign; National Bureau of Economic Research; Southern Methodist University; Boston College; Centre for Economic Policy Research - UK; European Corporate Governance Institute
• 刊物名称: REVIEW OF FINANCIAL STUDIES
• ISSN/ISSBN: 0893-9454
• DOI: 10.1093/rfs/hhae064
• 发表日期: 2024
• 关键词: institutional investors; resource-allocation; capital structure; corporate; reallocation; FIRMS; PROTECTION; earnings; MARKETS; equity

摘要

Previous research shows that incentives to meet short-term earnings targets can cause firms to increase share buybacks, leading to cuts in investments and employment. Using plant-level census data, we find that incentives to engage in earnings-per-share- motivated buybacks result in lower productivity at both the plant and firm level. We attribute this productivity drop to two mechanisms: reduced investment in productivity- augmenting technology, and inefficient allocation of resources across a firm's plants. We identify multiple frictions-including labor unions, financial constraints, agency problems, and adjustment costs-that can constrain efficient reallocations across plants and thus exacerbate the consequences of firms' short-term incentives.