lunes, 12 de octubre de 2015

Over the years, investors have become more impatient, as revealed in shorter holding periods of stocks.

Yes, Short-Termism Really Is a Problem

by Roger Martin

With Hillary Clinton’s tax proposals to encourage longer-term investing, the debate over whether American business is too fixated on the short term has moved from the dimly lit offices of earnest policy wonks into the klieg lights of U.S. primary season. Lots of commentators have jumped into the fray to declare that there is — or isn’t — a problem with short-termism, waving research studies of varying age and relevance.

Somewhat ironically, many engaging in the discussion seem to think that the issue itself has a short history. But that is far from true. Thirty years ago, no less a business guru than Peter Drucker weighed in, skewering short-termism in a Wall Street Journal editorial. “Everyone who has worked with American management can testify that the need to satisfy the pension fund manager’s quest for higher earnings next quarter, together with the panicky fear of the raider, constantly pushes top managements toward decisions they know to be costly, if not suicidal, mistakes,” he wrote.

One reason the question of short-termism still hasn’t been settled is that the answer is fundamentally unknowable. There is no control group; we can’t compare the performance of America with short-termism to that of America devoid of short-termism — or even prove beyond a doubt that short-termism exists in the first place.

That hasn’t stopped lots of people from studying the issue and offering their opinions—myself included. But the studies’ findings are ambiguous, and they have been for some time: In 1996 professor Kevin Laverty wrote a widely cited piece saying the evidence was inconclusive. I come out on the side believing that short-termism is a problem, but I can’t even view my own position as definitive.

There are, not surprisingly, voices confidently positioned on both sides of the debate. Those in Clinton’s camp include the venerable Aspen Institute, which produced a 2009 call to arms arguing that corporations’ short-term objectives corrode the “foundation of the American free enterprise system.”

On the other side, noted economist and hedge fund adviser Larry Summers cautions that reforming “quarterly capitalism” would risk driving us toward “Japan’s keiretsu system, which insulated corporate management from share price pressure by tying large companies together.” Keiretsu “was widely seen as a great Japanese strength,” Summers notes, “yet even apart from Japan’s manifest macroeconomic difficulties, Japanese companies lacking market discipline have squandered leads in sectors ranging from electronics to automobiles to information technology.”

A Review of Relevant Studies

With most contentious issues, it behooves us to take a deep breath and see what the accumulated body of research shows. Unfortunately, serious studies have come out with conflicting assessments about both the existence of short-termism and its consequences.

The data is often contradictory. For instance, one measure of short-termism is the level of corporate capital investment. Expenses considered short-term flow entirely through yearly income statements, while longer-horizon investments are capitalized and amortized on the books over many years.


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