Short-termism, investor clientele, and firm risk
By: Francois Brochet, Maria Loumioti, George Serafeim
Contributors: Loumioti, Maria; Serafeim, George; Harvard Business School
Series: Working paper / Harvard Business School -- 12-072; Working paper (Harvard Business School) -- 12-072.
Publisher: Harvard Business School
Published: 2011
Place of publication: [Boston]
Language: eng
Number of pages: 53
Description: Using conference call transcripts, we measure the time horizon that senior executives emphasize when they communicate with investors. We show that firms focusing more on the short-term have a more short-term oriented investor base. Moreover, we find that short-term oriented firms have higher stock price volatility, and that this effect is mitigated for firms with more long-term investors. We also find that short-term oriented firms have higher equity betas and as a result higher cost of capital. However, this result is not mitigated by the presence of long-term investors, consistent with these investors requiring a risk premium for holding the stock of short-term oriented firms. Overall, our evidence suggests that corporate short-termism is associated with greater risk and thus affects resource allocation.
Notes: "February 2012" -- Publisher's website.

Includes bibliographical references.