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- Title
Short-Term Investors, Long-Term Investments, and Firm Value: Evidence from Russell 2000 Index Inclusions.
- Authors
Cremers, Martijn; Pareek, Ankur; Sautner, Zacharias
- Abstract
We document that an increase in short-horizon investors is associated with cuts to long-term investment and increased short-term earnings. This leads to temporary boosts in equity valuations that reverse over time. To estimate these effects, we use difference-in-differences regressions around firms' additions to the Russell 2000, comparing firms with large and small increases in short-term ownership. We proxy for the presence of short-term investors using ownership by transient institutions. Our results suggest that short-term pressures by investors can lead to myopic firm behavior. This paper was accepted by Shiva Rajgopal, accounting.
- Subjects
RUSSELL 2000 Index; INVESTORS; INVESTMENTS
- Publication
Management Science, 2020, Vol 66, Issue 10, p4535
- ISSN
0025-1909
- Publication type
Article
- DOI
10.1287/mnsc.2019.3361