Abstract
This paper examines how the firm’s choice of investment horizon interacts with rent-seeking by privately informed, multitasking managers and the labor market. Two main results surface. First, managers prefer longer-horizon projects that permit them to extract higher rents from firms, so short-termism involves lower agency costs and is value maximizing for some firms. Second, when firms compete for managers, firms practicing short-termism attract better managerial talent when talent is unobservable, but larger firms that invest in long-horizon projects hire more talented managers when talent is revealed. (JEL D82, D86, G31, G32, J41) Received July 25, 2019; editorial decision July 7, 2020 by Editor Uday Rajan.
| Original language | English (US) |
|---|---|
| Pages (from-to) | 473-512 |
| Number of pages | 40 |
| Journal | Review of Corporate Finance Studies |
| Volume | 10 |
| Issue number | 3 |
| DOIs | |
| State | Published - Sep 1 2021 |
Bibliographical note
Publisher Copyright:© The Author(s) 2020. Published by Oxford University Press on behalf of The Society for Financial Studies. All rights reserved.