The short-termism trap: Catering to informed investors with limited horizons

• 成果类型: Article
• 署名作者: Dow, James; Han, Jungsuk; Sangiorgi, Francesco
• 署名单位: University of London; London Business School; Seoul National University (SNU); Frankfurt School Finance & Management
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2024.103884
• 发表日期: 2024
• 关键词: Informational externality; Price informativeness; myopia; Agency cost; Managerial compensation; Race to the bottom

摘要

Does the stock market exert short-term pressure on listed firms, do they respond, and is this response value reducing? We show that limited investor horizons indeed have those consequences, as follows. First, informative stock prices increase firm value; in our model, they reduce the agency cost of incentivizing managers. Second, short project maturity improves stock price informativeness by catering to informed investors with short horizons. Third, since informed trading capital is a scarce resource, attracting informed investors cannot increase an individual firm's price informativeness in equilibrium: it simply destroys shareholder value. This short-termism trapcan potentially destroy up to 100% of the benefits of stock market listing.