Marshall P. Shaffer

Wachtell Lipton discusses Short-Term Investors, Long-Term Investments, and Firm Value

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A January 2016 study, Short-Term Investors, Long-Term Investments, and Firm Value, by Martijn Cremers, Ankur Pareek and Zacharias Sautner, provides substantial “empirical” evidence for the fact that, in the current corporate governance environment, short-term investors possess the undue ability to pressure companies into maximizing near-term gains at the expense of long-term growth.

The study finds that after short‐term investors become shareholders of companies, those companies tend to decrease spending on R&D, and tend to experience temporarily increased earnings and stock prices. The results further indicate that when the short-term investors leave, these trends are all reversed, “so that … Read more

Wachtell Lipton discusses Staggered Boards, Long-Term Investments and Long-Term Firm Value

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Recent econometric studies (“empirical evidence”) definitively rebut the position taken by the Harvard Law School Shareholder Rights Project (SRP) that classified boards are associated with lower firm value and inferior outcomes for shareholders. After correcting serious statistical and econometrical flaws in the studies put forth to support declassification, these new studies conclude that staggered boards result in long-term value creation:

  • A 2014 study, “Staggered Boards and Firm Value, Revisited” found that, when measured across the “time series,” firm value improves after firms stagger, and declines after firms destagger, with the effects stronger at firms seemingly more focused

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