Are European listed corporations short-termist? by K. Lannoo, J. Lau Hansen and A. Thomadakis | European Capital Markets Institute (ECMI)

On 7 January, the European Capital Markets Institute (ECMI) published a commentary by Karel Lannoo, Jesper Lau Hansen and Apostolos Thomadakis, named Are European listed corporations short-termist? which acknowledged that EU listed companies are increasingly focused on the short-term financial benefits of shareholders rather than long-term interests and sustainable value creation. It argues that the root causes of this behaviour lie within the regulatory framework and market practices (i.e. lack of a strategic perspective on sustainability, short-term focus of board-member mandates, and remuneration), and alleges that this will both undermine the investment capacity of firms and harm cash balances.

In response to this alleged short-termism, the EU Commission is considering a series of measures such as: harmonising directors’ duties and board composition; incentivising long-term shareholding; reducing quarterly reporting; and broadening reporting targets. The study’s conclusions were strongly contested by top academics in both the EU and the US – a challenge that was at first not matched by the relevant European professional associations.

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About the authors

Karel Lannoo is General Manager of ECMI and CEO of CEPS.

Jesper Lau Hansen is Professor of Financial Markets Law, University of Copenhagen and Member of the Academic Board of ECMI.

Apostolos Thomadakis, Ph.D. is Researcher at ECMI and CEPS.