Does Short-Termism Influence the Market Value of Companies? Evidence from EU Countries

• Main Authors: Małgorzata Janicka, Aleksandra Pieloch-Babiarz, Artur Sajnóg
• Format: Article
• Language: English
• Published: MDPI AG 2020-11-01
• Series: Journal of Risk and Financial Management
• Subjects: sustainable finance; short-termism; quarterly reporting; market value of companies; EU countries
• Online Access: https://www.mdpi.com/1911-8074/13/11/272

This paper fits into the stream of current research on the concept of short-termism and its importance for economic sustainability, especially sustainable finance. Short-termism focuses on short time horizons by both corporate managers and the financial markets, and prioritizes short-time shareholder return over the long-term growth of the company’s value. This study engages the short-termism discussion by examining the effect of quarterly reporting on the long-term market value of listed companies. The aim of the article is to determine whether European companies experience the negative effects of short-termism, precisely, whether public companies that prepare quarterly reports, and which focus mainly on achieving the short-term goals of stock exchange investors, are seeing a decline in their market value in the long-term. We have not proven the existence of such a dependence, the increase in reporting frequency of public companies does not contribute to a decline in their long-term market value. In the case of the EU-15 the results of regression model estimation indicate a positive and statistically significant impact of the time of regular quarterly reporting on the buy-and-hold rates of return, in the “new” EU member states this relationship is not observed.