The Economic Significance of Long‐Term Plans

14 Pages Posted: 27 May 2020

See all articles by Sakis Kotsantonis

Sakis Kotsantonis

KKS Advisors

Christina Rehnberg

affiliation not provided to SSRN

Bronagh Ward

affiliation not provided to SSRN

George Serafeim

Harvard University - Harvard Business School

Brian Tomlinson

CECP

Date Written: Spring 2019

Abstract

The authors summarize the findings of their event study of the capital market reactions to an inaugural set of 17 CEO presentations of their ‘long‐term plans’ to institutional investors. The findings show that, although sell‐side analysts appear unresponsive to such plans, both trading volumes and stock prices exhibit significant abnormal reactions to the presentations, providing suggestive evidence that the communication of such plans conveys ‘value‐relevant’ information to investors with longer time horizons. Although based on an admittedly small sample, these findings shed light on the promise of long‐term plans and have been corroborated by analysis of the market response to the presentations of 10 more companies since the study was conducted. The authors also provide the outlines of a ‘content framework’ designed to help companies put together effective corporate plans and other long‐term disclosures. The framework is organized around nine main ‘themes,’ including policies governing capital allocation, corporate governance, and human capital development, as well as the statement of corporate purpose. After applying this framework to the 17 CEO presentations, the authors find that the more specific and forward‐looking the information disclosed in these long‐term plans, the more positive the capital market reaction.

Suggested Citation

Kotsantonis, Sakis and Rehnberg, Christina and Ward, Bronagh and Serafeim, George and Tomlinson, Brian, The Economic Significance of Long‐Term Plans (Spring 2019). Journal of Applied Corporate Finance, Vol. 31, Issue 2, pp. 22-33, 2019, Available at SSRN: https://ssrn.com/abstract=3604412 or http://dx.doi.org/10.1111/jacf.12343

Sakis Kotsantonis (Contact Author)

KKS Advisors

39-41 North Road
London, N79DP
United Kingdom

Christina Rehnberg

affiliation not provided to SSRN

Bronagh Ward

affiliation not provided to SSRN

George Serafeim

Harvard University - Harvard Business School ( email )

381 Morgan Hall
Boston, MA 02163
United States

HOME PAGE: http://goo.gl/q4cJ5A

Brian Tomlinson

CECP ( email )

5 Hanover Square, Suite 2102
New York, NY 10004
United States

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