Corporate Short-Termism: A Review and Research Agenda

Corporate short-termism, defined as a managerial preference for the short term that undermines a firm’s long-term interests, has become a topic of global concern for governments, investors, and business leaders. In recent years, heightened capital market pressures to maximize shareholder value have intensified focus on the issue, raising concerns that the pursuit of short-term shareholder value may come at the expense of long-term prospects and corporate sustainability. Our review reveals that despite abundant research on short-termism, we have only a fragmented understanding of the factors driving this phenomenon and its consequences. The difficulty of operationalizing the construct and the various firm actions and outcomes examined has hindered consensus as to the specific antecedents and implications of managers’ preference for the short term. Our paper seeks to provide greater clarity on corporate short-termism and to develop a framework for understanding what motivates management to prioritize the short term over the long term and the firm-level consequences of related decisions. In doing so, we hope to advance our state of knowledge on this important issue and motivate scholars to more fully unpack the drivers and outcomes of corporate short-termism.