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    Short-Termism, Shareholder Payouts, and Investment in the EU
    30 Nov 2020Working Paper Summaries

    Short-Termism, Shareholder Payouts, and Investment in the EU

    by Jesse M. Fried and Charles C.Y. Wang
    Shareholder-driven “short-termism,” as evidenced by increasing payouts to shareholders, is said to impede long-term investment in EU public firms. But a deep dive into the data reveals a different story.
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    Author Abstract

    Investor-driven “short-termism” is said to harm EU public firms' ability to invest for the long term, prompting calls for the EU to better insulate managers from shareholder pressure. But the evidence offered—in the form of rising levels of repurchases and dividends—is incomplete and misleading, as it ignores large offsetting equity issuances that move capital from investors to EU firms. We show that net shareholder payouts have been moderate, that both investment levels and investment intensity have been rising, and that cash balances have increased. In sum, the data provide little basis for the view that short-termism in the EU warrants corporate governance reforms.

    Paper Information

    • Full Working Paper Text
    • Working Paper Publication Date: October 2020
    • HBS Working Paper Number: HBS Working Paper 21-054
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    Charles C.Y. Wang
    Charles C.Y. Wang
    Tandon Family Professor of Business Administration
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