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  • Review of Corporate Finance Studies

Short-Termism and Capital Flows

By: Jesse M. Fried and Charles C.Y. Wang
  • Format:Print
  • | Pages:44
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Abstract

During 2007–2016, S&P 500 firms distributed to shareholders $7 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, when taking into account both direct and indirect equity issuances, net shareholder payouts by all public firms during this period were only 41% of net income. And, in fact, during this decade investment increased substantially 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.

Keywords

Short-termism; Quarterly Capitalism; Share Buybacks; Open Market Repurchases; Dividends; Equity Issuances; Seasoned Equity Offerings; Equity Compensastion; Acquisitions; Payout Policy; Capital Flows; Capital Distribution; Working Capital; Business and Shareholder Relations; Acquisition

Citation

Fried, Jesse M., and Charles C.Y. Wang. "Short-Termism and Capital Flows." Review of Corporate Finance Studies 8, no. 1 (March 2019): 207–233.
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About The Author

Charles C.Y. Wang

Accounting and Management
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More from the Authors

    • August 10, 2022
    • Wall Street Journal

    The Virtues of Stock Buybacks

    By: Jesse M. Fried and Charles C.Y. Wang
    • Journal of Financial Economics

    How Much Should We Trust Staggered Difference-In-Differences Estimates?

    By: Andrew C. Baker, David F. Larcker and Charles C.Y. Wang
    • March 2022
    • Faculty Research

    Corporate Governance in Business Analysis and Valuation

    By: Charles C.Y. Wang
More from the Authors
  • The Virtues of Stock Buybacks By: Jesse M. Fried and Charles C.Y. Wang
  • How Much Should We Trust Staggered Difference-In-Differences Estimates? By: Andrew C. Baker, David F. Larcker and Charles C.Y. Wang
  • Corporate Governance in Business Analysis and Valuation By: Charles C.Y. Wang
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