Equity markets are an important source of capital financing for firms, particularly in the United States. These large, liquid markets channel capital from savers to firms and facilitate corporate investment by distributing risks among many smaller investors. There is concern, however, that along with these benefits, equity financing has significant costs. One of the most prominent criticisms of the public ownership of firms is that investor pressure over short-term stock market performance causes public firms to forgo profitable, long-term investments.
This criticism has prompted such notable corporate leaders as Jamie Dimon of J.P. Morgan Chase and Warren Buffett of Berkshire … Read more