Title

Short-Term Investors, Long-Term Investments, and Firm Value: Evidence from Russell 2000 Index Inclusions

Document Type

Article

Publication Date

1-31-2020

Publication Title

Management Science

Volume

66

Issue

10

First page number:

4535

Last page number:

4551

Abstract

We document that an increase in short-horizon investors is associated with cuts to long-term investment and increased short-term earnings. This leads to temporary boosts in equity valuations that reverse over time. To estimate these effects, we use difference-in-differences regressions around firms’ additions to the Russell 2000, comparing firms with large and small increases in short-term ownership. We proxy for the presence of short-term investors using ownership by transient institutions. Our results suggest that short-term pressures by investors can lead to myopic firm behavior.

Keywords

Short-term investors; Long-term investments; Russell 2000 inclusions

Disciplines

Finance and Financial Management

Language

English

UNLV article access

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