Graduation Year
2017
Date of Submission
12-2016
Document Type
Open Access Senior Thesis
Degree Name
Bachelor of Arts
Department
Economics
Reader 1
Murat Binay
Rights Information
© 2016 Justin Alexander
Abstract
Short-termism and myopia on the part of corporate managers, analysts, and investors have created a business environment driven by the excessive focus on short-term results and the need to meet earnings targets at the expense of long-term value creation. These are accompanied by numerous consequences, including the potential for short-term-oriented firms, particularly in the U.S., to lag behind global long-term-oriented firms, as well as the potential for short-term mindsets in the corporate world to catalyze financial crises. In this paper, I demonstrate that the market generally assigns higher values to long-term firms rather than short-term ones. This is evidenced by the fact that firms characterized to be long-term according to various financial metrics have higher valuation multiples than their short-term counterparts. The results suggest that the market has a degree of sophistication that rewards investments for the future rather than earnings management and present gratification, and that the corporate world should therefore increasingly develop a long-term mentality.
Recommended Citation
Alexander, Justin, "Short-Termism and Corporate Myopia: The Values Assigned by the Market to Short-Term and Long-Term Firms" (2017). CMC Senior Theses. 1499.
https://scholarship.claremont.edu/cmc_theses/1499
