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Short-termism in financial decision-making: Uncovering the influence of managerial myopia on corporate financial asset allocation through MD&A textual analysis

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  • Chen, Chen
  • Wang, Tao
  • Jia, Ximeng

Abstract

This study utilizes the upper echelons and time orientation theoretical frameworks to analyze the impact of managers' temporal disposition on financial asset allocation within corporations. Through textual analysis and panel data analysis, the study demonstrates a positive correlation between managerial myopia and financial asset allocation. The study observes that corporate governance moderates this relationship, with high managerial power and low analyst following resulting in a stronger effect. The study further establishes that managerial myopia influences financial asset allocation through the adoption of more conservative strategies. Furthermore, the study highlights that increased financial asset allocation leads to higher short-term profits, but negatively impacts innovation performance. The findings of the study emphasize the role of managers' temporal perspective in financialization and provide valuable insights into managerial behavior.

Suggested Citation

  • Chen, Chen & Wang, Tao & Jia, Ximeng, 2023. "Short-termism in financial decision-making: Uncovering the influence of managerial myopia on corporate financial asset allocation through MD&A textual analysis," International Review of Financial Analysis, Elsevier, vol. 90(C).
    • Handle: RePEc:eee:finana:v:90:y:2023:i:c:s1057521923004167
    DOI: 10.1016/j.irfa.2023.102900
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