Explaining corporate short-termism: self-reinforcing processes and biases amonginvestors, the media and corporate managers
2014 (English)In: Socio-Economic Review, ISSN 1475-1461, Vol. 12, no 4, 667-693 p.Article in journal (Refereed) Published
Based on the related literature in economics, organizational sociology and the sociology of finance, this article constructs a novel conceptual explanation for corporate short-termism, that is, the tendency of corporate managers to sacrifice long-term investments to improve short-term earnings (STEs). We theorize about how such corporate short-termism emerges, at least partly, from systemic, self-reinforcing processes across various communities of actors including investors, the media and managers themselves. In doing so, we refute the common notion that corporate short-termism is caused by an inherent preference of investors or other actors to focus on STEs. Consequently, the systemic perspective offered by this article questions some conventional assumptions about the roots of corporate short-termism and emphasizes the influence of coordination mechanisms and behavioural biases in giving rise to self-reinforcing loops.
Place, publisher, year, edition, pages
2014. Vol. 12, no 4, 667-693 p.
corporate finance, firm strategy, markets, media, corporate shorttermism
Research subject Business Administration
IdentifiersURN: urn:nbn:se:su:diva-103174DOI: 10.1093/ser/mwu019ISI: 000344417700002OAI: oai:DiVA.org:su-103174DiVA: diva2:716107