Companies obsessing over the "long term" can be just as toxic to their value as the ones only looking at next week.
Corporate law is currently obsessed with preventing managers from chasing quick, short-term profits at the expense of the future. This study flips that narrative, revealing that managers frequently sacrifice company value to pursue long-term goals that are actually destructive, suggesting that current regulations are focused on the wrong timing problem.
Short-Termism and Long-Termism across Enterprise
SSRN · 6412459
Short-termism is the popular villain of U.S. corporate governance. Critics argue that company management adopts excessively short time horizons, opportunistically sacrificing long-term value for short-term profits. The costs of these tradeoffs are thought to be massive, and substantial core areas of corporate law and regulation are devoted to addressing it. <br><br>Puzzlingly, however, attention focuses only on publicly traded corporations. These firms are not the exclusive, the most common, or