Today, much of literature on short-termism in public
companies focuses on the negative consequences of short-term actions and the
foregoing of long-term value-added
opportunities. Short-term actions by company managers are often associated with
the emphasis on maximizing short-term earnings in the form of quarterly reports
to maximize short-term equity performance, even if the actions compromise the
long-term ability of the company to create value. Alternatively, the
introduction of private equity and the implementation of their short-term
strategies on their acquired companies often leave those companies with
structures that benefit them long after the private equity firm exits. I find
that the current view of the effects of short-termism must be expanded on to
include the possibility of an increase in the long-term performance of public
companies after private equity ownership and the implementation of short-term
private equity strategies. More broadly, I find that the current view of
short-termism is incorrect in only correlating short-term actions with
short-term performance.
References
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