Ivey Professor Tima Bansal has won the Investor Responsibility Research Center Institute (IRRCi) annual investor research competition.
Bansal’s academic research paper, “Does a Long-Term Orientation Create Value? Evidence from a Regression Discontinuity," co-authored with Caroline Flammer, assistant professor of Strategy and Innovation at Boston University and formerly a faculty member at Ivey, shows that providing long-term incentives to executives ― in the form of long-term executive compensation ― leads to increased long-horizon investments and higher business performance.
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“Although both managers and investors acknowledge that short-termism may be harmful to business, we provide clear, causal evidence of the harm in this research,” said Bansal. “Firms that offer long-term incentives for executives experience a higher share price right away and higher profits after one year. We discovered two important reasons: the firm invests more in research and development and invests more in stakeholders. Through this research, we are able to show that long-term executive incentives help the firm and helps society.”
The award was presented at the Columbia Law School’s 2016 Millstein Governance Forum, Governance, Leadership and the Future of the Corporation, in New York City. Bansal and Flammer received a $10,000 award.
“The paper got at the heart of a key issue facing the economy, investors and companies – short-termism,” said Jon Lukomnik, IRRCi executive director. “This research offers important contributions to the global debate on the need for businesses to maintain a long-horizon focus in a short-term world, as well as the benefits of such a long-term focus for investors and companies alike.”
The IRRC Institute is a nonprofit research organization that funds academic and practitioner research that enables investors, policymakers and other stakeholders to make data-driven decisions. IRRCi research covers a wide range of topics of interest to investors, is objective, unbiased and disseminated widely.
