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Tackling Investor And Managerial Myopia, Emeka Duruigbo
Tackling Investor And Managerial Myopia, Emeka Duruigbo
Emeka Duruigbo
Market observers and legal commentators link the collapse, a few years ago, of giant energy company Enron and some fabled financial firms to the short-termism phenomenon – investors acting like traders and influencing corporate managers to make policy decisions based on quarterly earnings statements. Opponents of short-termism note that the future well-being of many investors, corporations, overall economy and society at large is in jeopardy if investors with a near-term horizon, especially hedge funds, enjoy a dominant role in corporate governance. Skeptics dismiss the concerns, insisting that the notion of pervasive short-term investing is a figment of opponents’ imagination. Moreover, …
Stimulating Long-Term Shareholding, Emeka Duruigbo
Stimulating Long-Term Shareholding, Emeka Duruigbo
Emeka Duruigbo
This article answers, in the affirmative, two core research questions: do we need long-term shareholders and can we find them? The economy needs long-term shareholders to provide prudent and profitable patient capital, generate an antidote to corporate short-termism and spearhead managerial accountability. Finding these shareholders requires a structure that provides the right environment and incentives for such investment. The article presents a novel application of the trust fund theory – the dominant philosophical paradigm of American corporate finance in the 19th century - as a vehicle for stimulating long-term shareholding. The central features of the reformulated trust fund theory include …