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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