Doctor of Philosophy
Corporate short-termism is one of the most significant concerns facing companies and society today. It demands that companies maximize profits in the short term regardless of the long-term consequences. Corporate short-termism can destroy long-run wealth generation, fuel job lay-offs, impede innovation, and neglect society’s social and environmental interests. Paul Polman, CEO of Unilever, declares that short-termism, “lies at the heart of many of today’s problems.”
In spite of the potential harm it may cause, corporate short-termism is one of least understood topics in management research. Anecdotal evidence suggests that financial market pressures fuel corporate short-termism, but little research has explored this claim. Difficulties of measuring and empirically testing short-termism have contributed to this limited work. In my dissertation, I develop a new measure of organizational time horizons to test the presence of short-termism in companies. I then apply this measure to answer the question: What are the causes and consequences of corporate short-termism?
In three essays, I postulate that financial markets affect organizational time horizons (Essay #1), which ultimately influence organizational-level outcomes, such as the corporate investment decisions of managers (Essay #2) and the resiliency of companies (Essay #3). I investigate these hypotheses in three empirical studies, using data on large, multinational companies across an array of industries. The methods I employ include textual analysis, difference-in-differences, two-stage least squares with instrumental variables, and survival analysis. Taken together, this body of work provides a clearer understanding of the role that financial markets have in shaping the temporal perceptions of managers, and how these perceptions affect managers’ strategic decisions and the performance of their companies.
DesJardine, Mark R., "The Causes and Consequences of Corporate Short-Termism" (2016). Electronic Thesis and Dissertation Repository. 3784.