Corporate Long-Termism: Looking Toward an (Un)Certain Future

56 Pages Posted: 2 Aug 2021

See all articles by Tuugi Chuluun

Tuugi Chuluun

Loyola University Maryland

Siamak Javadi

University of Texas - Rio Grande Valley

Takeshi Nishikawa

University of Colorado at Denver

Andrew K. Prevost

University of Vermont

Date Written: July 27, 2021

Abstract

Do investors benefit when managers have long-term perspective? The dominant narrative suggests that they do. In this paper, we exploit the language characteristics of annual reports and offer a nuanced answer. We find that future-focused language is associated with relatively lower corporate risk, greater investment in tangible assets, more innovation, lower cost of capital, wider lender base, and higher firm value when accompanied by lower uncertainty. These associations either disappear or reverse, when uncertain tone is high, indicating that corporate long-termism is value enhancing only when accompanied by low uncertainty.

Keywords: Textual analysis, future orientation, short-termism, uncertaint tone

JEL Classification: G10, G20, G30,

Suggested Citation

Chuluun, Tuugi and Javadi, Siamak and Nishikawa, Takeshi and Prevost, Andrew K., Corporate Long-Termism: Looking Toward an (Un)Certain Future (July 27, 2021). Available at SSRN: https://ssrn.com/abstract=3894555 or http://dx.doi.org/10.2139/ssrn.3894555

Tuugi Chuluun

Loyola University Maryland ( email )

4501 North Charles Street
Baltimore, MD 21210-2699
United States

Siamak Javadi

University of Texas - Rio Grande Valley ( email )

1201 W. University Dr.
Edinburg, TX 78539
United States

Takeshi Nishikawa

University of Colorado at Denver ( email )

Box 173364
1250 14th Street
Denver, CO 80217
United States

Andrew K. Prevost (Contact Author)

University of Vermont ( email )

Burlington, VT 05405
United States

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