The approach known as “short-termism” is known to affect the stocks but recent studies have also shown that short-termism directly affects the prosperity of a business. A Booz & Co. brought attention to a recent Harvard Business School study which revealed that businesses often encourage managers to set current goals that will not produce benefits in the future. The result is less stability: “a higher price of capital and a lower return on assets.”
The study showed trends in businesses by analyzing the time-frame emphasis of press conferences and then looking at the success of the each firm. One of the key points of their findings was that firms “whose performance is driven by branding and innovation are more long-term oriented compared to companies whose performance is driven by efficiency of execution.”