With little foresight beyond next year, management sometimes closes down plants and fudges accounting to make this year's earnings look better and boost the stock price.
Often, it is simply because management is excessively rewarded by short-term incentives such as stock options.
While investors might benefit from these shenanigans in the short-run, a new study points out the long-term effects are frequently negative.
A new Harvard Business School study entitled "Short-termism, Investor Clientele and Firm Risk" has shown that short-termism is bad for investors increasing their risks without any corresponding increase in returns.
In other words, risk and the short-term thinking usually go hand in hand.