Paper: Do Long-Term Investors Improve Corporate Decision Making?

21 Jun 2018 9:52 AM | Mary Adams (Administrator)

Powerful findings that encourage the long-term thinking advocated by the integrated reporting movement. Here's the abstract of this paper by Jarrad Harford of University of Washington, Ambrus Kecskes of York University - Schulich School of Business, and Sattar Mansi of Virginia Tech:

We study the effect of investor horizons on a comprehensive set of corporate decisions. We argue that monitoring by long-term investors generates decision making that maximizes shareholder value. We find that long-term investors strengthen governance and restrain managerial misbehaviors such as earnings management and financial fraud. They discourage a range of investment and financing activities but encourage payouts. Innovation increases, in quantity and quality. Shareholders benefit through higher profitability that the stock market does not fully anticipate, and lower risk.

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