Sky Blog
Lawyers and investors pay close attention to how stock-based deals affect the acquirer’s short-term earnings per share (EPS). Merger announcements are regularly accompanied by discussions of whether the deal will be accretive or dilutive for the acquirer’s EPS, and if …
A hot topic in corporate governance is the so-called short-termism of publicly held companies. In response to actual and anticipated pressure from activist hedge funds, companies are, some say, focusing too much on short-term gains by, for instance, shunning research …
A vast literature studies the effects of antitakeover provisions (ATPs) on firm value. The academic consensus is that ATPs harm firm value because they partly insulate managers from the threat of takeover, and that view has become very influential. Prominent …
Do U.S. companies focus too much on short-term profits at the expense of long-term investments, profits, and growth? There is considerable debate among academics, practitioners, and politicians about the relevance of short-termism, its possible sources, and potential mechanisms to mitigate …
As we noted in early 2018, the threat of activism continues to be high, and has become a global phenomenon. The conclusion of a volatile and dynamic 2018 prompts a brief update of the state of play.
By adopting a systematic cross-national comparative approach, my recent study provides an overview of corporate governance (CG) around the world. It takes stock of what we know about the two main CG models, the variations within and across these models, …
Earlier this month, the CEO of Pepsi Co. suggested to President Trump that eliminating quarterly reporting (and shifting to biannual reporting) would reduce the pressure on managers to focus on the short-term. As impulsive as Elon Musk, the president bought …
I should be a prime candidate to support the lengthening of the financial reporting cycle from three to six months, as the White House—and many others—now say they want the SEC to do. I want public corporations to be more …
Trading in U.S. equity markets is fast and cheap. While proponents of ending quarterly reporting point to the dangers of short-termism, less frequent disclosure is also likely to lead to a decline in liquidity and to greater trading costs. The …
President Trump has directed the Securities and Exchange Commission to study whether a public company’s reporting requirements should shift from a quarterly to semi-annual schedule. Doing so, according to the president, “would make business (jobs) even better in the U.S.” …
While “The Accountable Capitalism Act” introduced on August 15 by Senator Elizabeth Warren contains several very worthwhile provisions, it is premised on the federalization of all public corporations with revenues in excess of $1 billion. Mandatory federal incorporation and the …
Academic researchers in corporate finance have in recent years taken a renewed interest in the impact of private firms on employment, growth, and other positive developments in national economies. In a recent article, we develop this new field of research …
The popularity of index funds, which automatically track an index of stocks, is continuing to grow in the U.S, and, albeit less intensely, in the EU. Due to the high concentration of the index funds industry, the exponential rise of …
Short-termism is a loaded phrase in debates over investment time horizons, often used to criticize investors and corporate managers deemed overly focused on near-term gains at the expense of long-term value. One argument is that U.S. mutual funds, as significant …
Whether the purpose of the corporation is to generate profits for its shareholders or to operate in the interests of all of its stakeholders has been actively debated since 1932, when it was the subject of dueling law review articles …
Corporate short-termism has been much discussed over the past few decades, but has recently become a growing concern for the U.S. economy. Executives and politicians warn of increased market pressure on corporations to meet short-term performance metrics at the expense …
This past year witnessed a number of new corporate governance initiatives. Among the most significant:
The message of the Dow/DuPont merger and split up is simple: No firm is today “too big to target.” Activists can see the transaction as evidence that, even in the rare case where they lose a proxy fight (as they …
There is a frenzied rush for shareholders to get a new ‘right”, the right to put up their own nominees for board membership. Boards of directors, so goes a dominant opinion, are not to be fully trusted to pick the …
Over the last few years, hedge fund activism has received a great deal of coverage in financial media (and in the mainstream press), has triggered heated debates and been the focus of much academic research. Saviour of capitalism for some, …