Prudent Capital Management: The Role of Explicitly Stated Long-Term Investment Strategy

Abstract: The purpose of this thesis is to investigate how companies with an explicitly stated long-term investment strategy manage their capital in comparison to companies without such a statement. The research addresses the topic by analysing leading US companies in the following areas: Short-term vs. long-term perspectives, leverage, earnings & share price, capital structure and capital expenditures. We find that that an explicitly stated long-term investment strategy may be indicative towards more conservative capital management. However, our research also shows that financial data alone is insufficient in tackling this complex issue.