How Institutions Shape Stock Market Pressures and Managerial Interests

Abstract

This chapter explains how institutions shape stock market pressures and managerial interests to produce corporate short-termism. It challenges accounts that attribute short-termism solely to managerial myopia, shareholder power, or the stock market by showing that none is sufficient in isolation. The chapter argues that short-termism emerges from the interaction of managerial self-interest, stock market structures, and shareholder-oriented corporate governance institutions. Focusing on the United States, it traces how institutional changes associated with neoliberalism transformed stock market structures and reoriented managerial interests towards short-term shareholder value. It identifies key structural features of the stock market, including dispersed shareholding, liquidity, information asymmetry, real-time valuation, and openness to takeover, and shows how these features jointly pressure managers to prioritise short-term returns. The chapter demonstrates that these pressures are historically contingent and institutionally mediated rather than inherent to stock markets. By contrasting public and private firms, it shows how exposure to stock market structures intensifies short-termism. The chapter concludes that institutions play a decisive role in enabling or constraining stock market–induced short-termism, setting up the book’s broader comparative analysis across capitalist systems.