[PEN-L:3822] Re: stock market & investment

["Peter J Dorman" <dorman@xxxxxxxxxxxxx>]

There is a discussion of these issues in chapters 3 and 4 (especially 4) of
Margaret Blair's new book OWNERSHIP AND CONTROL (which I strongly recommend).
Blair supports the view that equity price movements do not have a harmful
effect on visible firm performance -- spending on R&D etc.  She does, however,
subscribe to a more institutional view of the "short-termism" critique, saying
that less visible aspects of the firm, such as information structure and
management culture, may be at risk.  My reaction is that she didn't do a good
job of separating the "market myopia" theory from her "institutional"
alternative, either theoretically or empirically.  I would be interested in the
take of other penellers, particularly those who do finance for their bread and
butter.

Incidentally, I am using Blair in the classroom with great success.  Students
are learning a lot about the nuts and bolts of U.S. capitalism, and they seem
to be interested.

Peter Dorman