Hello Saed,

The changing technology is allowing companies to report frequently and in turns  helping firms in reducing information gaps between owners and managers. It is the result of external forces such as technology, regulations, social culture (thrust for information by customer and shareholders) environment. The managerial short-termism is also the result of external forces such as competition for products and services, competition for raising capital, twenty four hour global products and services marketplace, and stock market.The managerial short-termism is also result of the changing external environment, and as a result means changing environment, the mangers are making decision based on the real time information. They are not waiting  for the quarterly or annual reports. Reducing agency cost could result in reducing the risk of the company, and two views are consistent with the risk and returns relationship.

Thanks.

Dear Mr. Saed,

In my opinion any decision involving two competing and conflicting factors is always sub-optimal. It is just that the degree of sub-optimality is accepted and hence decisions are taken in business. 

If all the equity investors can take a long term view at business NOT the STOCKS (which are derived assets out of the value of business) only then there can frequent reporting not compromise on crucial long term investments.

One way as part of financing strategy corporations in India have addressed this issue by bringing in closely held ownership pattern with majority shareholders and institutional investors as the dominant partners.

Countries with weak corporate governance structure the Anglo Saxon model indirectly suggests for such frequent reporting since that is the only way equity investors can get an insight into the working of the management. Now if they were truly "informed" about corporate financing and investment strategies there would not have been the conflict of under investment at all. I think if the equity investors nurture a short term stance as part of their investment goals their buy and sell decisions would reflect it.

Managers with shorter tenures at the helm and those who are weekly compensated would also be compelled to behave so.

Effectively the responsibility of convergence lies with the owners and majority shareholders themselves. They should posses adequate ownership control to exert the right influence on the strategic investment decisions of the company. The western world has put in place takeover, negotiation through board as mechanisms to maneuver investment strategies.

The above is my opinion. In case you are attempting to undertake research, then i think the model can incorporate the above ownership pattern related control variables to         re-xamine the relationship between the corporate investments and short-term financial reporting. 

Well, the right question should be, whether those two aspects are in opposition indeed. You need some solid theory justifying the supremacy of long-term oriented investments over short-term investments, but I guess you will not succeed. There is always conflict between return and risk; long-term investments shall bringer higher returns to compensate increased risk. The investment decision is influenced by risk attitude of managers (those risk-averse will probably tend to prefer short-termism view). However, the stakeholders in company (investors, creditors, etc.) may have also impact on the horizon of investmens. Some may prefer longer period with higher returns (accepting higher risk), other may require better liquidity and thus shorter investments with lower returns and lower risk. Consequently, frequent interim reporting may be a transmitter balancing agency costs and investment horizon of the entity's stakeholders. Whether there is conflict or concord between agency problem and managerial short-termism under frequent interim reporting will differ across companies and entity-specific determinants shall be examined to detect the relation.