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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
  • Fair Value Accounting for Debt Securities and Loan Assets By: Jung Koo Kang, Krishna G. Palepu and Charles CY Wang
  • A Decade of Corporate Governance Reform in Japan (2013-2023) By: Charles C.Y. Wang and Akiko Kanno
  • Silicon Valley Bank: Gone in 36 Hours By: Jung Koo Kang, Krishna G. Palepu, Charles C.Y. Wang and David Lane
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