Is It Time to Get Rid of Earnings-per-Share (EPS)?

53 Pages Posted: 6 Dec 2018

See all articles by Heitor Almeida

Heitor Almeida

University of Illinois at Urbana-Champaign; National Bureau of Economic Research (NBER)

Date Written: October 27, 2018


This paper discusses recent empirical evidence showing that the presence of earnings-per-share (EPS) targets is associated with short-termist behavior. EPS targets affect stock repurchases, R&D investments, capital expenditures, employment, and the structure of M&A deals. The practice of chasing EPS with changes in real investments appears to lead to long-term underperformance and can significantly affect economic growth and welfare. This discussion suggests that analysts, investors, and companies should stop focusing on EPS as a measure of performance. I also discuss how to break the link between performance targets and short-termism.

Keywords: Short-Termism, Stock Repurchases, R&D Investments, Employment, Mergers, Executive Compensation

JEL Classification: G31, G32, G34, G35, G38

Suggested Citation

Almeida, Heitor, Is It Time to Get Rid of Earnings-per-Share (EPS)? (October 27, 2018). Available at SSRN: or

Heitor Almeida (Contact Author)

University of Illinois at Urbana-Champaign ( email )

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National Bureau of Economic Research (NBER)

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