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Informational benefits of managerial myopia

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  • Li, Cheng

Abstract

We show that managerial myopia has an informational benefit that has been overlooked in the prior research. Compared with managers who care sufficiently about the long-term, a moderately myopic manager incentivizes the proponent of a risky long-term project to produce more information about the project, leading to more informed decision making and higher firm value.

Suggested Citation

  • Li, Cheng, 2019. "Informational benefits of managerial myopia," Economics Letters, Elsevier, vol. 185(C).
    • Handle: RePEc:eee:ecolet:v:185:y:2019:i:c:s0165176519303519
    DOI: 10.1016/j.econlet.2019.108705
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    References listed on IDEAS

    as
    1. Stein, Jeremy C, 1988. "Takeover Threats and Managerial Myopia," Journal of Political Economy, University of Chicago Press, vol. 96(1), pages 61-80, February.
    2. Emir Kamenica & Matthew Gentzkow, 2011. "Bayesian Persuasion," American Economic Review, American Economic Association, vol. 101(6), pages 2590-2615, October.
    3. Graham, John R. & Harvey, Campbell R. & Rajgopal, Shiva, 2005. "The economic implications of corporate financial reporting," Journal of Accounting and Economics, Elsevier, vol. 40(1-3), pages 3-73, December.
    4. Alex Edmans, 2009. "Blockholder Trading, Market Efficiency, and Managerial Myopia," Journal of Finance, American Finance Association, vol. 64(6), pages 2481-2513, December.
    5. Raphael Boleslavsky & Christopher Cotton, 2018. "Limited capacity in project selection: competition through evidence production," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 65(2), pages 385-421, March.
    6. Juan-JosÈ Ganuza & JosÈ S. Penalva, 2010. "Signal Orderings Based on Dispersion and the Supply of Private Information in Auctions," Econometrica, Econometric Society, vol. 78(3), pages 1007-1030, May.
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    Cited by:

    1. Nizkorodov, Evgenia, 2021. "Evaluating risk allocation and project impacts of sustainability-oriented water public–private partnerships in Southern California: A comparative case analysis," World Development, Elsevier, vol. 140(C).
    2. Li, Cheng & Mao, Huangxing, 2024. "Delegation to incentivize information production," Mathematical Social Sciences, Elsevier, vol. 129(C), pages 1-11.
    3. Huang, Xiaohong & Xu, Yue & Ni, Jian, 2024. "Operational decisions of public firms and feedback mechanism from stock market," Economics Letters, Elsevier, vol. 238(C).
    4. Qilong Cao & Meng Ju & Jinglei Li & Changbao Zhong, 2022. "Managerial Myopia and Long-Term Investment: Evidence from China," Sustainability, MDPI, vol. 15(1), pages 1-20, December.
    5. Wang, Zongrun & Zhang, Taiyu & Ren, Xiaohang & Shi, Yukun, 2024. "AI adoption rate and corporate green innovation efficiency: Evidence from Chinese energy companies," Energy Economics, Elsevier, vol. 132(C).
    6. Xi, Mengjie & Liu, Yang & Fang, Wei & Feng, Taiwen, 2024. "Intelligent manufacturing for strengthening operational resilience during the COVID-19 pandemic: A dynamic capability theory perspective," International Journal of Production Economics, Elsevier, vol. 267(C).
    7. Arya, Anil & Ramanan, Ram N.V., 2024. "Long-term firm gains from short-term managerial focus: Myopia and voluntary disclosures," Journal of Accounting and Economics, Elsevier, vol. 77(2).

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    More about this item

    Keywords

    Firm value; Managerial objectives; Persuasion; Signal informativeness;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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