A REVIEW OF SHORT-TERMISM AND ITS RELATIONSHIP WITH INVESTMENT EFFICIENCY

https://doi.org/10.5281/zenodo.17166560

Abstract

This study reviews the extant literature on short-termism and its effect on real investments and investment efficiency. To do so, we gathered, review and re-presented the major literature explaining the short-termism and its effect on real investments and investment efficiency. With the help of detailed literature, we found that short-term decisions and short-term objectives lead to underinvestment and explain the short-termism phenomenon. However, this study identified that firms take myopic decisions to achieve their short-term objectives. By achieving the short-term objectives, they ignore the long-term investment decisions; therefore, they end up with underinvestment. Based on this justification, this study proposed that short-term decisions and short-term objectives simultaneously affect the investment efficiency through one larger framework. The existing study lacks the identification of the combined framework of short-term decisions, short-term objectives and investment efficiency. The future research may investigate the proposed framework to empirically understand the phenomena.