In a recent paper titled “Stock Market Short-Termism’s Impact,” author Mark J. Roe counters arguments that US companies are so driven by short-term objectives that they are foregoing investment in research and development and other long-term investments. Roe’s paper comes just as legislation has been introduced that would require a study as to whether the obligation to file quarterly reports on Form 10-Q contribute to short-termism. The focus on short-termism has been linked to increased shareholder activism and increased trading, which commenters suggest cause companies to diminish their investment in R&D and to focus on stock buybacks. However, the author notes that economy-wide R&D spending is steady or rising. Similarly, while stock buyback activity has increased, stock buybacks are not leaving companies cash poor.
