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Measuring the costs of short-termism
Institution:1. Mahidol University International College (MUIC), Nakhon Pathom, Thailand;2. Pennsylvania State University, School of Graduate Professional Studies, Malvern, PA 19355, United States;3. King Abdu-Alaziz University (KAU), Jeddah, Saudi Arabia;1. School of Accounting, Guangdong University of Finance & Economics, Guangzhou, Guangdong 510320, People''s Republic of China;2. School of Business, Western Sydney University, Parramatta, NSW 2150, Australia;3. Newcastle Business School, University of Newcastle, 55 Elizabeth Street, Sydney, NSW 2000, Australia;4. School of Business Administration, South China University of Technology, Guangdong 510000, People''s Republic of China
Abstract:A potential cost of modern capital markets is short-termism, with agents in the financial intermediation chain weighing near-term outcomes too heavily at the expense of longer-term opportunities and thus forgoing valuable investment projects and potential output. This paper sets out an analytical framework and empirical estimates of the potential costs of short-termism arising from distortions to the cost of capital and investment intentions.
Keywords:Financial economics  Investment
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