End the Religion of ROE

Harvard Business Review

Return-on-equity hurdles threaten them all. Conversely, why market cigarettes? We think there's more to business success — and that something as straightforward as a simple equation could put capitalism on a better path. To an extent not widely recognized, it was an equation in the first place that gave ROE the power to dominate not just investment decisions, but an entire business culture. The revolution ran on equity capital, which was in short supply.

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