Short-Termism, Shareholder Payouts, and Investment in the EU
European Financial Management, Forthcoming
38 Pages Posted: 13 Oct 2020 Last revised: 3 Mar 2021
Date Written: February 9, 2021
Investor-driven "short-termism" is said to harm EU public firms' ability to invest for the long term, prompting calls for the EU to better insulate managers from shareholder pressure. But the evidence offered---rising levels of repurchases and dividends---is incomplete and misleading: it ignores large offsetting equity issuances that move capital from investors to EU firms. We show that, over the last 30 years and the last decade, net shareholder payouts have been moderate, and investment and cash balances have increased. In sum, the data provide little basis for the view that short-termism in the EU warrants corporate governance reforms.
Keywords: short-termism; EU; payout policy; investment; innovation
JEL Classification: G15, G32, G35, G38, O52
Suggested Citation: Suggested Citation