Does Investing in the Long Term Pay Off for Firms?

8 Pages Posted: 8 Aug 2017

See all articles by David Souder

David Souder

University of Connecticut - Department of Management

Philip Bromiley

University of California, Irvine

Scott Mitchell

University of Kansas

Greg Reilly

University of Connecticut

Date Written: August 1, 2017

Abstract

Observers have argued that managers pay too much attention to short term results at the expense of long run value. This article expands on the managerial implications of research that examines the relationship between short-termism and firm performance. Using capital expenditure data from US manufacturing firms, the authors confirm that most firms have the opportunity to increase performance by lengthening their investment horizons. However, a small subset of firms that make extremely long horizon investments would benefit from shorter investment time horizons. The authors make several recommendations for managers seeking to lengthen investment time horizon to increase firm profits.

Keywords: investment horizon, long term, strategy

Suggested Citation

Souder, David and Bromiley, Philip and Mitchell, Scott and Reilly, Greg, Does Investing in the Long Term Pay Off for Firms? (August 1, 2017). Rutgers Business Review, Vol. 2, No. 2, 2017, Available at SSRN: https://ssrn.com/abstract=3014700

David Souder (Contact Author)

University of Connecticut - Department of Management ( email )

Storrs, CT 06269-1041
United States

Philip Bromiley

University of California, Irvine ( email )

Campus Drive
Irvine, CA 62697-3125
United States

Scott Mitchell

University of Kansas ( email )

1415
Lawrence, KS 66045
United States

Greg Reilly

University of Connecticut ( email )

Storrs, CT 06269-1063
United States

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