Investor Horizons and Corporate Policies

Francois Derrien (), Ambrus Kecskes and David Thesmar

Working Papers from HAL

Abstract: This paper looks at the effect of shareholder horizon on corporate behavior. In perfect capital markets, corporate behavior should be insensitive to shareholder horizon, but when investment opportunities are not well valued by the market, shareholder horizon matters. We first present a simple framework to show that shareholder horizon should be looked at in conjunction with stock misvaluation. We build on this insight to design a novel empirical strategy to assess the impact of investor short-termism. Consistent with our simple framework, we find that, when a firm is undervalued, the presence of more short-term investors is associated with bigger shareholder payout, less equity issue, less external financing, and as a result, less investment and less R&D spending. Under our interpretation, long-term investors are not more involved in corporate governance, yet, they affect corporate policy.

Keywords: Investor Horizon; Financing Decisions; Corporate Investment (search for similar items in EconPapers)
Date: 2012-05-12
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Citations: View citations in EconPapers (3)

Published in 2012

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Related works:
Journal Article: Investor Horizons and Corporate Policies (2013)
Working Paper: Investor Horizons and Corporate Policies (2013)
Working Paper: Investor Horizons and Corporate Policies (2010)
Working Paper: Investor Horizons and Corporate Policies (2010)
Working Paper: Investor Horizons and Corporate Policies (2010)
Working Paper: Investor Horizons and Corporate Policies (2010)
Working Paper: Investor Horizons and Corporate Policies (2010)
Working Paper: Investor Horizons and Corporate Policies (2010)
Working Paper: Investor Horizons and Corporate Policies (2010)
Working Paper: Investor Horizons and Corporate Policies (2010)
Working Paper: Investor Horizons and Corporate Policies (2010)
Working Paper: Investor Horizons and Corporate Policies (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:wpaper:hal-00696602

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