Short-Termism, Shareholder Payouts, and Investment in the EU
34 Pages Posted: 13 Oct 2020 Last revised: 15 Oct 2020
Date Written: October 9, 2020
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---in the form of rising levels of repurchases and dividends---is incomplete and misleading, as it ignores large offsetting equity issuances that move capital from investors to EU firms. We show that net shareholder payouts have been moderate, that both investment levels and investment intensity have been rising, and that 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; quarterly capitalism; corporate governance; EU; buybacks; repurchases; dividends; equity issuances; equity compensation; acquisitions; payout policy; capital flows; capital distribution; CAPEX; R&D; investment; innovation
JEL Classification: G14, G32, K22
Suggested Citation: Suggested Citation