Who Creates Short-Term Pressure? An Analysis of Firms with Different Ownership Structures

Several papers report evidence on corporate short-term value maximization e.g. in the form of earnings management, or reluctance to undertake profitable investments, if such investments hurt the result in the short run. We provide new evidence on who causes such short-term behavior and what kind of effect is has on companies. We find significant differences in the perceived short-term pressure caused by different shareholder and stakeholder categories such as families, activist owners, or market forces (financial analysts). In firms with allegedly more short-term owners, the pressure felt is significantly higher, and its sources include not only the current owner categories, but also perceived marginal investors. Firms also show cross-sectional variation across different ownership backgrounds in their actions to cope with the pressure