The Harvard Law School Forum on Corporate Governance https://corpgov.law.harvard.edu The leading online blog in the fields of corporate governance and financial regulation. Fri, 05 Jun 2026 16:08:54 +0000 en-US hourly 1 https://wordpress.org/?v=6.5.8 https://corpgov.law.harvard.edu/wp-content/uploads/2024/02/cropped-photography-4-e1706898544564-1-32x32.png Short-Termism of Institutional Investors and the Double Agency Problem – The Harvard Law School Forum on Corporate Governance https://corpgov.law.harvard.edu 32 32 Short-Termism of Institutional Investors and the Double Agency Problem https://corpgov.law.harvard.edu/2013/05/09/short-termism-of-institutional-investors-and-the-double-agency-problem/?utm_source=rss&utm_medium=rss&utm_campaign=short-termism-of-institutional-investors-and-the-double-agency-problem https://corpgov.law.harvard.edu/2013/05/09/short-termism-of-institutional-investors-and-the-double-agency-problem/#comments Thu, 09 May 2013 13:26:07 +0000 http://blogs.law.harvard.edu/corpgov/?p=44489?d=20150105101953EST Posted by June Rhee, Co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Thursday, May 9, 2013
Editor's Note:

The following post comes to us from Paul Frentrop and Daniëlle Melis, a Professor and an Associate Professor, respectively, at Nyenrode Business Universiteit. The following post is based on an inaugural lecture by Professor Frentrop.

Complaints that investors only look for short-term gains are nothing new. As early as 1990 an Economist article proclaimed: “The old bugbear of businessmen — that fund managers are too obsessed with the short term, and unwilling to buy shares in companies with ambitious research projects — is back on the prowl.”

Recently, the turnover of shares in listed companies has grown to numbers far exceeding those of 1990. Does this change in investor behavior influence the behavior of managers in listed firms?

The institutional innovation of freely tradable shares, traceable to Holland in the 17th century, made it possible for companies such as the Dutch East India Company to have longer investment horizons than individual investors. Listing shares ensured that an investor could recoup his money from other investors and that, as a result, companies didn’t have to repay individual investors. Seen in this light, one might assume that investor short-termism would have little influence on board decisions at listed companies and much more influence on board decisions at privately held companies. General opinion, however, disagrees.

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