The Perils of Playing to Quarterly Expectations

Favaro, Paul; Rotz, Greg
January 2004
Financial Executive;Jan/Feb2004, Vol. 20 Issue 1, p34
Academic Journal
A discussion on how corporations that become too concerned with earnings per share (EPS), short-term goals and quarterly expectations can find themselves under tremendous pressure and hurt their value in the long run. The authors note that this type of strategy can hinder a company from building the capabilities, taking the risks and making the investments necessary to increase their long-term value. The authors outline three practices that companies can adopt to help overcome this trap starting with a redefinition of exceptional performance from something related to quarterly expectations to something more concerned with meeting long-term goals. The second practice involves setting goals to reduce internal stagnation while the third practice suggests setting goals in investor relations. INSET: How Nordstrom Set Short-Term Targets From Longer-Term Value....


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