Defining, Measuring, and Comparing Short-Termism

Abstract

This chapter defines, measures, and compares corporate short-termism and sets out the empirical strategy used in the book’s large-N analysis. It specifies the book’s central empirical question: whether the existence and extent of short-termism varies among publicly listed firms across national contexts once structural and economic differences are controlled for, and whether coordinated market economies are converging towards the Anglo-American model in capital allocation. It defines short-termism primarily as relatively high shareholder payout and treats real investment as a related but distinct outcome that cannot be straightforwardly equated with long-termism or short-termism in all contexts. It then justifies the selection of Germany, Japan, the United States, and the United Kingdom and explains the treatment of the United States and the United Kingdom as an Anglo-American benchmark while still analysing them separately. The chapter describes the data source, sample construction, accounting comparability, and the study period, and it outlines the main measures for shareholder payout and real investment, including alternative operationalisations. It details the use of ratios, growth rates, common-currency comparisons using purchasing power parity, inflation adjustment, and winsorisation to address outliers. Finally, it presents the matching procedure used to compare public firms across countries by industry and size and previews how matched comparisons are applied in the empirical chapters that follow.