Professors Johnson and Pazderka show evidence to the contrary. Stock markets reward companies that take the long view. This means that stock market investors recognize the importance of taking time to develop a product and are willing to put their capital behind projects that may not show an immediate profit. In Chapter 3 of their book, Professors Johnson and Pazderka suggest that mergers and takeovers of companies listed on stock exchanges help to make those companies efficient. A company is usually taken over because investors on the outside suspect that the company is badly run, or that its full potential is not being realized.
Investors take the company over, discipline wayward managers, and get rid of inefficient operations.
This suggests that managers had not been doing all they could to make shareholders well off. In the 1980s, junk bonds were used to finance many takeovers. Junk bonds have a bad name in the media, but they allowed investors to buy badly managed companies and restore efficiency. Chapter 4 explains that stock markets are like laboratories where new ideas get tried out. Stocks are experiments in the creation of wealth.