Short-Term Investors, Long-Term Investments, and Firm Value: Evidence from Russell 2000 Index Inclusions
First page number:
Last page number:
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.
short-term investors, long-term investors, Russell 2000 inclusions
Business | Corporate Finance
Short-Term Investors, Long-Term Investments, and Firm Value: Evidence from Russell 2000 Index Inclusions.
Management Science, 66(10),