Short-termism and capital flows

• Main Authors: Fried, J.M (Author), Wang, C.C.Y (Author)
• Format: Article
• Language: English
• Published: Oxford University Press 2019
• Online Access: View Fulltext in Publisher

 From 2007 to 2016, S&P 500 firms distributed     trillion via buybacks and dividends, over 96% of their aggregate net income, prompting claims that “short-termism” is impairing firms' ability to invest and innovate. We show that, accounting for both direct and indirect equity issuances, net shareholder payouts by all public firms during this period totaled only 41% of net income. And, during this decade, investment substantially increased while cash balances ballooned. In short, S&P 500 shareholder-payout figures cannot provide much basis for the notion that short-termism has been depriving public firms of needed capital. © The Author(s) 2018. Published by Oxford University Press on behalf of The Society for Financial Studies.