Do long-term investors improve corporate decision making?

By Jarrad Harford, Ambrus Kecskés, Sattar A. Mansi. Journal of Corporate Finance, 2017

262 citations recorded by the source corpus.

We study the effect of investor horizons on a comprehensive set of corporate decisions. We argue that monitoring by long-term investors generates decision making that maximizes shareholder value. We find that long-term investors strengthen governance and restrain managerial misbehaviors such as earnings management and financial fraud. They discourage a range of investment and financing activities but encourage payouts. Innovation increases, in quantity and quality. Shareholders benefit through higher profitability that the stock market does not fully anticipate, and lower risk.

Subfields: Accounting, Finance

View Paper: https://www.semanticscholar.org/paper/be5a3ca0f0eeab1e70059da728dc6eb9b7c26af4

Citations in the corpus

• Are Foreign Investors Locusts? The Long-Term Effects of Foreign Institutional Ownership (2017, unknown): “Harford, Kecskes, and Mansi (2015) show that long-term institutional investors monitor managers and encourage firm policies that increase shareholder value and discourage overinvestment.7 5 Domestic institutional investors are often affiliated with the banks that act as creditors, underwriters,…”
• The Sustainability Footprint of Institutional Investors (2018, unknown): “More recently, Harford, Kecskes, and Mansi (2017) show that long-term investors strengthen corporate governance and restrain managerial misconduct and that through their influence on corporate policies, shareholders benefit through both unexpectedly higher profitability and lower risk.”