Why stock-market short-termism is not causing severe damage to the American economy According to many political leaders, pundits, and corporate lawmakers, stock-market-driven short-termism - when corporations prioritize immediate results in the next quarter over their longer-term interests - is harming the American economy. This view, popular in influential circles, sees short-termism as causing sharply declining research and development (R&D), too many stock buybacks, and severe environmental harm. But the data fits badly with this black-and-white representation of short-termism. Mark J. Roe analyzes the best data on R&D, corporate borrowings and buybacks, and long-term investment trends to show that stock market short-termism is not at the root of these economic problems. The book shows that blaming short-termism overlooks the real causes of declining investment, R&D changes, and environmental deterioration. By pointing to other sources of tension like accelerating technological change, rising political uncertainty, and repeated economic disruptions, Missing the Target argues for a more nuanced understanding of the challenges to the American economy. Roe disproves many of the core claims against short termism. R&D spending, for example, is rising faster than the economy is growing. It's government R&D support that's been falling. Reversing that decline is the best first target for bettering American R&D. Missing the Target deepens the discussion of the American economy by analyzing the factors that contribute to current trends and by making a bold but straightforward claim: stock market short-termism is not the problem.
Introduction PART I: Looking for Stock-Market-Driven Short-Termism's Impact on the Economy 1. The Short-Term Problem Perceived 2. Looking for the Economy-Wide Impact 3. The Social Costs of Stock-Market Short-Termism Understood, Clarified, and Defined 4. The Heavy Cost of Misdiagnosis: Missing the Targets PART II: Analyzing the Stock Market's Impact 5. Concept and Evidence for Stock-Market-Driven Short-Termism 6. Concept and Evidence Against It 7. Evaluating the Firm-by-Firm Short-Termism Evidence PART III: The Proposed Solutions' Limited Efficacy-And Their Costs 8. Cures and Their Sharp Limits: Insulating Executives from Financial Markets 9. Cures and Their Sharp Limits: Taxing and Regulating Financial Markets PART IV: The Politics of the Corporate Short-Termism Controversy 10. Confusing Short-Termism with Accelerating Technological Change 11. Short-Termism as Popular Narrative: Connotation, Category Confusion, and Confirmation 12. Political Support at the Top of the Corporation: Executives vs. Shareholders 13. Political Support Outside the Corporation: Popular Opinion vs. Wall Street Conclusion Index
Mark J. Roe is the David Berg Professor of Corporate Law at Harvard Law School. His research focuses on corporate structures and how they relate to politics, interest groups, and popular opinions of the corporation.
Reviews for Missing the Target: Why Stock-Market Short-Termism Is Not the Problem
"Roe argues convincingly why pressure on companies to earn short-term profits isn't causing the harm critics say it is. . . . And that matters for public policy, lawmakers and the dominant narrative in how America's corporations are run. There are plenty of problems, but they need different fixes. . . . [A] must-read for anyone interested in markets and policy.... * James Mackintosh, Streetwise, Wall Street Journal * The idea that short-termism is a problem is so widespread that few people dare to question it. Mark Roe is one of these people. Armed with rigorous evidence and real-life examples, this eye-opening book will change the way you think about short-termism. It has profound implications for companies, investors, policymakers - and the general public's view on the rights and wrongs of capitalism. * Alex Edmans, Professor of Finance, London Business School * In a world of misguided certainties, the view that stock market driven pressure to perform on a quarterly basis drives managements to be damagingly short-term focused is one of the most pernicious. This book is an essential corrective for serious investors, business managers, government policy makers and thoughtful citizens. It is also an invaluable example of careful analysis in the face of overwhelming accepted but false conventional wisdom. * Bruce Greenwald, Columbia Business School * It's so popular to beat up on short termism in the corporate world. But Mark Roe uses rigorous logic and a wealth of data to debunk many of the arguments used by its critics.""-Robert C Pozen, Senior Lecturer, MIT Sloan School of Management, Formerly President of Fidelity Investments"
