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37 J. Corp. L. 265 (2011-2012)
Short-Termism, the Financial Crisis, and Corporate Governance

handle is hein.journals/jcorl37 and id is 269 raw text is: Short-Termism, the Financial Crisis, and Corporate Governance Lynne L. Dallas* I. INTRODUCTION ................................................... 267 II. MANAGERIAL MYOPIA OR EARNINGS MANAGEMENT ............ .......... 278 III. THE FINANCIAL CRISIS REVISITED .................................... 281 IV. INVESTING AND SHORT-TERMISM ..................................... 293 A. Structural Reasons for Increasing Debt and Risky Loans................................ 293 B. Competition Among Asset Managers for Investment Funds............................. 295 C. Traders versus Investors, the Transient Institutional Shareholder, and Earnings Management ............................... ....... 296 1. Traders versus Investors: Momentum Trading, High Frequency Trading, and High Stock Turnover. ........................... 297 2. The Impact of Short-Term Trading on Earnings Management ................... 302 a. Studies Focusing on the Presence of Transient Institutional Shareholders................................... ...... 302 b. Studies Focusing on the Heterogeneous Beliefs of Investors in Speculative Markets.......... ................. ........... 306 D. Financial Firms Using Nonfinancial Firms as Short-Term Arbitrage Opportunities Through the Use, or Threatened Use, of Shareholder Voting Rights ...................................................... 307 V. MANAGING AND SHORT-TERMISM ......................................... 310 A. The Prisoner's Dilemma: The Difficulty of Coordinating Behavior Beneficial to the Long-Term Health ofFirms ........... ......... 310 B. Signaling and Signal Jamming: Giving Misleading Signals to the Market...... 312 C. The Lemons Problem ............................................. 313 * Professor of Law, University of San Diego School of Law, J.D. Harvard Law School. I am grateful for the insightful comments of Jennifer S. Taub, Jordan M. Barry, Natalie Mizik, Tamar Frankel, Jeff Schwartz, Timothy A. Canova, Nadelle Grossman, David Millon, William K. Wang, Cheryl Lyn Wade, Arthur E. Wilmarth, Jr., John Whiteclay Chambers, Amy Piro Chambers, John C. Coffee, Jr., and Bernard S. Black. I am also grateful for the research assistance of USD law students Denise Trans-Nguyen, Sara Cabaral, John Hogan, Matthew Libroia, Ben Stein, Kyle Friedman, Rob Breunig, the research assistance of reference librarians at the USD Pardee Legal Research Center, and the administrative assistance of Perla Bleisch and Judith A. Crookshanks. I am also grateful for the helpful assistance of the students working on this Article on The Journal of Corporation Law.

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