ET CITINGS

In recent decades, commentators have argued that many corporations exhibit short-termism, a tendency to take actions that maximise short-term earnings and stock prices rather than the long-term value of the corporation. Using conference call transcripts , we measure the time horizon that senior executives emphasise when they communicate with investors. We studies transcripts of 70,042 earnings calls - conference calls where, executives discuss quarterly results with investors, analysis and the media - that were held by 3,613 firms during 2002-10. This involved searching for 14 terms used by management such as ' long term' and ' years' that would suggest a longer time horizon approach. We show that firms focusing more on the short term have more short-term oriented investor bases. Also, we find that short-term-oriented firms have ( or attract ) hihgter stock price volatility, and that this effect is mitigated for firms with more long term investors. Overall, our evidence suggests that corporate short-termism is associated with greater risk and thus, affects resource allocation. Short termsim s arises because of market participatits's prefernce for investment edecisions athat yield short-term profits but not necessariylong term profits ( or worse the short term benefits come at the expens of long term value creation).