Do Long-Term Investors Improve Corporate Decision Making?
نویسندگان
چکیده
We study the effect of investor horizons on a comprehensive set of corporate decisions. Longterm investors have the means and motive to monitor corporate managers, which generates corporate decisions that are consistent with shareholder value maximization. We find that longterm investors strengthen corporate governance and restrain managerial misbehaviors such as earnings management and financial fraud. They discourage a range of investment and financing activities but encourage payouts. Shareholders benefit through higher stock returns, higher profitability that is not fully anticipated by the market, and lower risk. Firms diversify their operations. We use a popular identification strategy to establish causality of our results.
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