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Short-termism: Insights from business leaders


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We found the respondents – all of whom were C-level executives or board members–most often cited their own executive teams and boards (rather than investors, analysts, and others outside the company) as the greatest sources of pressure to perform.






Found this in the footnotes to one of my textbooks.

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Check this out from the text book:


The results can defy logic. At a company pursuing a major acquisition, we participated in a discussion about whether the deal's likely earnings dilution was important. One of the company's bankers opined that he knew any impact on EPS would be irrelevant to value, but he used it as a simple way to communicate with boards of directors. Elsewhere, we've heard company executives acknowledge that they , too, doubt that the impact of EPS is so important - but the also use it anyway, "for the benefit of Wall Street analysts." Investors also tell us that a deal's short-term impact on EPS is not that important. Apparently everyone knows that a transactions short-term impact on EPS doesn't matter, yet they all pay attention to it.
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In a survey of 20 UK board members who had served on the boards of both exchange-listed companies and companies owned by private-equity firms, 15 of 20 respondents said that private-equity board provided more value. Their answers suggested two key differences. First, listed-company directors are more focused on risk avoidance than value creation. Second, private-equity directors spend on average nearly three times as many days on their roles as do those at listed companies.


Source of that quote: Voice of Experience: Public versus Private Equity, V. Acharya, C.Kehoe and M. Reyner



Sorry....nothing new here

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