Working Paper: NBER ID: w23464
Authors: Steven N. Kaplan
Abstract: U.S. companies are often criticized for being overly short-term oriented. This paper documents that those criticisms have a long history, going back at least thirty-five years. The paper then considers the implications of sustained short-termism for corporate profits, venture capital investments and returns, private equity investments and returns, and corporate valuations. The paper finds little long-term evidence that is consistent with the predictions of the short-term critics.
Keywords: short-termism; corporate profits; venture capital; private equity; corporate valuations
JEL Codes: G3; L25
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| short-termism (G31) | underinvestment in capital expenditures (G31) |
| underinvestment in capital expenditures (G31) | poor long-term performance (P17) |
| short-termism (G31) | poor long-term corporate outcomes (G33) |
| short-termism (G31) | corporate profits (G35) |
| underinvestment in capital expenditures (G31) | venture capital (VC) investments (G24) |
| short-termism (G31) | opportunities for VC investments (G24) |