Do Long-Term Investors Improve Corporate Decision Making?

81 Pages Posted: 5 Oct 2014 Last revised: 27 Nov 2017

See all articles by Jarrad Harford

Jarrad Harford

University of Washington; European Corporate Governance Institute (ECGI)

Ambrus Kecskes

York University - Schulich School of Business

Sattar Mansi

Virginia Tech

Multiple version iconThere are 2 versions of this paper

Date Written: November 25, 2017


We study the effect of investor horizons on a comprehensive set of corporate decisions. We argue that monitoring by long-term investors generates decision making that maximizes shareholder value. We find that long-term investors strengthen governance and restrain managerial misbehaviors such as earnings management and financial fraud. They discourage a range of investment and financing activities but encourage payouts. Innovation increases, in quantity and quality. Shareholders benefit through higher profitability that the stock market does not fully anticipate, and lower risk.

Keywords: Agency problems; Monitoring; Managerial myopia; Investor horizons; Corporate governance; Managerial misbehavior; Investment; Innovation; Financing; Off balance sheet debt; Debt maturity; Payouts; Valuation; Profitability; Volatility; Credit events

JEL Classification: G23, G31, G32, G34, G35

Suggested Citation

Harford, Jarrad and Kecskes, Ambrus and Mansi, Sattar, Do Long-Term Investors Improve Corporate Decision Making? (November 25, 2017). Finance Down Under 2015 Building on the Best from the Cellars of Finance Paper, Asian Finance Association 2015 Conference Paper, Available at SSRN: or

Jarrad Harford

University of Washington ( email )

Box 353226
Seattle, WA 98195-3226
United States
206-543-4796 (Phone)
206-543-7472 (Fax)


European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
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1000 Brussels

Ambrus Kecskes (Contact Author)

York University - Schulich School of Business ( email )

4700 Keele Street
Toronto, Ontario M3J 1P3

Sattar Mansi

Virginia Tech ( email )

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