Short-Term Investors, Long-Term Investments, and Firm Value

2017 ◽  
Author(s):  
K. J. Martijn Cremers ◽  
Ankur Pareek ◽  
Zacharias Sautner
Keyword(s):  
Firm Value ◽  
Short Term

scholarly journals Do Higher-Rated or Enhancing ESG of Firms Enhance Their Long–Term Sustainability? Evidence from Market Returns in Korea

2020 ◽  
Vol 12 (7) ◽  
pp. 2664 ◽  
Author(s):  
Yeonwoo Do ◽  
Sunghwan Kim
Keyword(s):  
Stock Market ◽  
Firm Value ◽  
Stock Price ◽  
Abnormal Returns ◽  
Market Returns ◽  
Short Term ◽  
Stock Market Returns ◽  
Listed Firms ◽  
The Third

In this study, we investigate the effects of the level and changes in environmental, social and corporate governance (ESG) rating, an index developed to represent a firm’s long-term sustainability, on the stock market returns of Korea Composite Stock Price Index (KOSPI) listed firms over the period 2011–2018. We find that the changes in ESG ratings have statistically significant short-term effects on their abnormal returns. However, their impacts on short-term abnormal returns decrease some days after the disclosure and become negative in the third year. The results imply that investors in the Korean stock market do not view corporate social responsibility activities as a means of supporting their long-term sustainability, judging from the firm value for a long period after their rating. Rather, based on the effects of the changes on coefficient signs over the period—positive in the year and the year after, no effects in the following year, and negative in the third year and later—we can infer that the short-term oriented market sentiments of investors might worsen their long-term stock performances, thus deteriorating their sustainability and growth opportunities.

Nexus Between Debt Financing and Market Value Moderated by Firm Size: Panel Data Evidence from India

2021 ◽  
pp. 097226292110526
Author(s):  
Rajesh Desai
Keyword(s):  
Firm Size ◽  
Firm Value ◽  
Small Firms ◽  
Negative Impact ◽  
Market Value ◽  
Debt Financing ◽  
Least Square ◽  
Short Term ◽  
Using Data

This study examines the effect of debt financing on market value of firm and evaluates the moderating effect of firm size on this relationship. Tobin’s Q and market-to-book value ratio are used as proxy for market value whereas long-term as well as short-term debt ratios are considered to indicate debt financing. Using data of 164 capital goods sector companies for 10 years (from 2010 to 2019), panel least square (PLS) regression with fixed and random effects (RE) model has been applied for data analysis. Based on findings, the study reports significant negative impact of borrowings (both long-term and short-term) on market value of selected companies. Further, the outcome of study confirms that firm size moderates the relationship between debt financing and firm value. The magnitude and significance of the effect of debt are stronger for small firms as compared to medium and large firms. Present verdicts will assist managers in designing capital structure policies by considering its impact on market value according to firm-size.

scholarly journals The Effect Of Cross-Border And Domestic Acquisitions On Shareholder Wealth: Evidence From Brics Acquirers

2014 ◽  
Vol 8 (4) ◽  
pp. 34-45 ◽  
Author(s):  
Svetlana Grigorieva ◽  
R. Morkovin
Keyword(s):  
Firm Value ◽  
Developed Countries ◽  
Shareholder Wealth ◽  
Wealth Effects ◽  
Risk Level ◽  
Short Term ◽  
Cross Border ◽  
Long Term Performance ◽  
Term Performance

Svetlana A. Grigorieva National Research University The Higher School of Economics [email protected] The topic devoted to cross-border M&A performance has received wide attention in academic literature.Most existing studies examine wealth effects of international M&As in developed countries. Wecontribute to existing research by examining the market reaction to the announcements of M&As initiatedby companies from BRICS countries over 2000–2012. We assess the long-term performance ofM&A deals along with the short-term one and provide a copmarative analysis of company wealth gainsin cross-border and domestic M&As. Based on the sample of 117 cross-border deals and 247 domesticM&As we find that the stock market reacts favorably and statistically significant to the announcementsof domestic deals in the short run. Returns to foreign acquirer shareholders are also positive and statisticallysignificant. Comparing the effects of M&As on firm value in the short term for foreign anddomestic acquisitions we reveal that the latter outperform the cross-border M&As. Our analysis basedon the buy-and-hold abnormal return method shows the opposite result. We also find that the crossborderM&A deals increase the downside risk level of acquirers in the long term. According to ouranalysis, the key determinants of short- and long-term performance of M&A deals are the acquirer’sFCFF, percentage change in the acquiring country’s exchange rate against the target country currencyduring the acquisition year, and the level of international diversification of acquirers.

scholarly journals Relationship Between Firm Value And Financial Structure: A Study On Firms In ISE Industrial Index

2011 ◽  
Vol 9 (9) ◽  
pp. 61 ◽  
Author(s):  
Mikail Altan ◽  
Ferhat Arkan
Keyword(s):  
Firm Value ◽  
Financial Structure ◽  
Short Term ◽  
Basic Objective ◽  
Value Of Firm

Maximization of firm value has become the basic objective of the firms. Short-term debt, long-term debt and equity used by firms may affect firm value. Objective of the study is to investigate the effect of financial structures of firms on their values. In the study 127 firms data, that are indexed in ISE, are used. The data were analyzed using the SPSS 15.0 program. According to the results of the analysis the values of the firms were affected by financial structures of firms. For example; a 1% change in equity cause 1.183% change value of the firm, a 1% change in the short-term debt cause 0.362% change value of the firm, a 1% change in change long-term debt cause 0.163% change in the value of firm.

scholarly journals The Effects of Corporate Financing Decisions on Firm Value in Bursa Malaysia

2019 ◽  
Vol 11 (3) ◽  
pp. 127 ◽  
Author(s):  
Chaleeda ◽  
Md. Aminul Islam ◽  
Tunku Salha Tunku Ahmad ◽  
Anas Najeeb Mosa Ghazalat
Keyword(s):  
Firm Value ◽  
Primary Objective ◽  
Free Cash Flow ◽  
Debt Maturity ◽  
Short Term ◽  
Corporate Financing ◽  
Financing Decisions ◽  
Total Debt ◽  
The Cost

The primary objective of shareholders and financial managers is generally stated to be the maximization of shareholders’ wealth by increasing the firm value. This research was undertaken to investigate the effect of corporate financing decisions on firm value       . The research has been carried out using the panel data procedure for a sample of 256 firms from 9 sectors listed on Bursa Malaysia during the period 2000-2015. The study uses Tobin’s Q representing firm value for the dependent variable. The corporate financing was measured by leverage (short-term debt to total assets, long-term debt to total assets, total debt to total assets and total debt to total equity) and debt maturity (long-term debt to total debt). Short-term debt to total assets and long-term debt to total assets has a positive significant relationship to firm value. This finding is consistent with the view that leverage and dividends mitigate agency costs of free cash flow problems, therefore, increasing firm value. Total debt to total assets affects firm value negatively. This proves that although there are benefits of debts, there is also the cost of debts. The cost of debt financing arises from the increase in the probability of bankruptcy. Firm value does not depend on the length of debt maturity.

The effects of IT: from performance to value

2014 ◽  
Vol 114 (1) ◽  
pp. 70-85 ◽  
Author(s):  
Chorng-Shyong Ong ◽  
Po-Yen Chen
Keyword(s):  
Firm Performance ◽  
Firm Value ◽  
Design Methodology ◽  
Test Methods ◽  
Short Term ◽  
Content Type ◽  
Sustained Competitive Advantage ◽  
It Capabilities ◽  
Practical Implications

Purpose – The purpose of this paper is to differentiate and define the concepts of firm performance and firm value. Then, the implications of information technology (IT)-enabled firm performance and firm value will be clarified. Finally, the effects of IT capabilities on firm performance and firm value will be compared. Design/methodology/approach – InformationWeek's IT leader rankings (from 1998 to 2011) are used for analysis in a longitudinal study. Three different test methods (i.e. significant years, significant levels, and adjusted-previous performance) are used. Findings – It is confirmed that no matter which tests are examined, the contributions of IT capabilities to firm value are all greater than those to firm performance. This also shows that IT contributes to long-term influences more than it does to short-term influences. Research limitations/implications – This study confirms that firm performance (accounting-based measures) and firm value (financial market-based measures) are two different variables and IT capabilities affect these two parts differently. Practical implications – Firms should use a long-term viewpoint to deploy their IT strategies. This will create a long-term growth of firm value leading to greater competitiveness, and, ultimately, sustained competitive advantage. Originality/value – The differences between firm performance and firm value in measurements, characteristics, and implications are specified. The empirical study confirms that IT capabilities contribute more to firm value than to firm performance, although IT capabilities influence both at the same time.

The Financial Information Content of Perceived Quality

1994 ◽  
Vol 31 (2) ◽  
pp. 191-201 ◽  
Author(s):  
David A. Aaker ◽  
Robert Jacobson
Keyword(s):  
Stock Market ◽  
Firm Value ◽  
Stock Price ◽  
Stock Return ◽  
Business Performance ◽  
Perceived Quality ◽  
Short Term ◽  
Quality Perceptions ◽  
Current Term

The authors investigate whether movement in a firm's stock price, that is, a measure of firm value, is associated with information contained in perceived quality measures. In a model that also allows for the effect of economywide factors and a firm's return on investment, they find a positive relationship between stock return and changes in quality perceptions. These results imply that the quality measure contains information, incremental to that reflected by current-term accounting measures, about future-term business performance. They suggest that managers should convey information to the stock market, such as the brand's quality image, useful in depicting the long-term prospects of the business. By doing so, the stock market will rely less on short-term measures of business performance, and managers will be freer to undertake strategies necessary for ensuring the long-term viability of their firms.

scholarly journals Distributional differences in the time horizon of executive compensation

2021 ◽  
Author(s):  
Michael Haylock
Keyword(s):  
Quantile Regression ◽  
Executive Compensation ◽  
Firm Value ◽  
Fixed Effects ◽  
Time Horizon ◽  
Performance Pay ◽  
Short Term ◽  
Left Tail ◽  
The Right

AbstractThe aim of executive compensation plans is to incentivize executives to maximize long-term firm value. Past research shows that executives’ pay is determined by short-term stock performance to a substantial degree. This paper tests for distributional differences in the time horizon of the performance–pay relation, controlling for executive-firm fixed effects in a quantile regression framework. I identify short-term and long-term firm and industry performance using a filter and estimate distributional differences in the short-term and long-term performance–pay relation using method of moments–quantile regression (Machado and Santos Silva in J Econ 213:145–173, 2019). I find the right tail of the conditional total compensation distribution has a more long-term-oriented performance–pay relation than the left tail. By contrast, the right tail of the conditional accumulated wealth distribution has more short-term-oriented performance–pay relation than the left tail. Results show that asymmetry in short-term firm performance–pay relations may exist, but do not vary across the conditional distribution.

Short-Term Investors, Long-Term Investments, and Firm Value: Evidence from Russell 2000 Index Inclusions

2020 ◽  
Vol 66 (10) ◽  
pp. 4535-4551 ◽  
Author(s):  
Martijn Cremers ◽  
Ankur Pareek ◽  
Zacharias Sautner
Keyword(s):  
Firm Value ◽  
Firm Behavior ◽  
Short Term ◽  
Difference In Differences ◽  
Short Horizon ◽  
Over Time

We document that an increase in short-horizon investors is associated with cuts to long-term investment and increased short-term earnings. This leads to temporary boosts in equity valuations that reverse over time. To estimate these effects, we use difference-in-differences regressions around firms’ additions to the Russell 2000, comparing firms with large and small increases in short-term ownership. We proxy for the presence of short-term investors using ownership by transient institutions. Our results suggest that short-term pressures by investors can lead to myopic firm behavior. This paper was accepted by Shiva Rajgopal, accounting.

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