Short-Termism and Capital Flows

48 Pages Posted: 10 Jan 2017 Last revised: 25 Nov 2018

See all articles by Jesse M. Fried

Jesse M. Fried

Harvard Law School; European Corporate Governance Institute (ECGI)

Charles C. Y. Wang

Harvard Business School (HBS)

Date Written: November 14, 2018


During 2007-2016, S&P 500 firms distributed to shareholders $7 trillion via buybacks and dividends, over 96% of their aggregate net income, prompting claims that "short-termism" is impairing firms' ability to invest and innovate. We show that, when taking into account both direct and indirect equity issuances, net shareholder payouts by all public firms during this period were only 41% of net income. And, in fact, during this decade investment increased substantially while cash balances ballooned. In short, S&P 500 shareholder-payout figures cannot provide much basis for the notion that short-termism has been depriving public firms of needed capital.

Keywords: short-termism; quarterly capitalism; corporate governance; share buybacks; open market repurchases; dividends; equity issuances; seasoned equity offerings; equity compensation; acquisitions; payout policy; capital flows; capital distribution

JEL Classification: G14, G32, K22

Suggested Citation

Fried, Jesse M. and Wang, Charles C. Y., Short-Termism and Capital Flows (November 14, 2018). Review of Corporate Finance Studies, Forthcoming., European Corporate Governance Institute (ECGI) - Law Working Paper No. 342/2017, Harvard Business School Accounting & Management Unit Working Paper No. 17-062, Available at SSRN: or

Jesse M. Fried

Harvard Law School ( email )

1575 Massachusetts
Griswold Hall 506
Cambridge, MA 02138
United States
617-384-8158 (Phone)


European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels

Charles C. Y. Wang (Contact Author)

Harvard Business School (HBS) ( email )

Soldiers Field
Boston, MA 02163
United States

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