Short-Term Investors, Long-Term Investments, and Firm Value: Evidence from Russell 2000 Index Inclusions
Document Type
Article
Publication Date
1-1-2020
Publication Title
Management Science
Volume
66
Issue
10
First page number:
4359
Last page number:
4919
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 investors, Russell 2000 inclusions
Disciplines
Business | Corporate Finance
Language
English
Repository Citation
Cremers, M.,
Pareek, A.,
Sautner, Z.
(2020).
Short-Term Investors, Long-Term Investments, and Firm Value: Evidence from Russell 2000 Index Inclusions.
Management Science, 66(10),
4359-4919.
http://dx.doi.org/10.1287/mnsc.2019.3361