A1 Refereed original research article in a scientific journal
Who creates short-term pressure? An analysis of firms with different ownership structures
Authors: Eva Liljeblom, Mika Vaihekoski
Publisher: Association of Business Schools Finland
Publication year: 2010
Journal: Liiketaloudellinen Aikakauskirja
Number in series: 3
Volume: 59
Issue: 3
First page : 239
Last page: 264
ISSN: 0024-3469
Web address : http://lta.hse.fi/2010/3/lta_2010_03_a1.pdf
Abstract
Several papers report evidence on corporate short-term value maximization e.g. in the form of earnings management, or reluctance to undertake profitable investments, if such investments hurt the result in the short run. We provide new evidence on who causes such short-term behavior, and what kind of effect is has on companies. We find significant differences in the perceived short-term pressure (i.e. pressure that may compromise long-term goals) caused by different shareholder and stakeholder categories such as families, activist owners, or market forces (financial analysts). In firms with allegedly more short-term owners, such pressure felt is significantly higher, and its sources include not only the current owner categories, but also perceived marginal investors. Firms also show cross-sectional variation across different ownership backgrounds in their actions to cope with such pressure.
Several papers report evidence on corporate short-term value maximization e.g. in the form of earnings management, or reluctance to undertake profitable investments, if such investments hurt the result in the short run. We provide new evidence on who causes such short-term behavior, and what kind of effect is has on companies. We find significant differences in the perceived short-term pressure (i.e. pressure that may compromise long-term goals) caused by different shareholder and stakeholder categories such as families, activist owners, or market forces (financial analysts). In firms with allegedly more short-term owners, such pressure felt is significantly higher, and its sources include not only the current owner categories, but also perceived marginal investors. Firms also show cross-sectional variation across different ownership backgrounds in their actions to cope with such pressure.
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