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Are managers with investment bank experience myopic?

Author

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  • Lai, Li
  • Lan, Chundan
  • Wu, Shan

Abstract

This study examines whether managers with investment bank experience (IB managers) exhibit myopic behaviour. We focus on the top managers of nonfinancial firms in China to examine whether IB managers sacrifice real investments by allocating more resources to short-term investments. We find that firms with IB managers tend to have fewer long-term investments and more financial-asset investments that yield high levels of short-term returns than firms without IB managers. Consequently, firms with IB managers suffer from poor long-term performance and exert a negative externality on environmental performance. We further document that this effect is stronger when IB managers hold powerful positions or when they have intensive investment bank experience. Further, this effect is weakened when firms have powerful shareholders. Overall, our study identifies how variations in managers’ work experiences are reflected in managerial myopia and documents the factors that negatively affect the long-term performance and environmental awareness of firms.

Suggested Citation

  • Lai, Li & Lan, Chundan & Wu, Shan, 2024. "Are managers with investment bank experience myopic?," Journal of Business Research, Elsevier, vol. 183(C).
  • Handle: RePEc:eee:jbrese:v:183:y:2024:i:c:s0148296324003618
    DOI: 10.1016/j.jbusres.2024.114857
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    More about this item

    Keywords

    Employment history; Managerial myopia; Investment bank; Corporate investment; Environment;
    All these keywords.

    JEL classification:

    • M51 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Firm Employment Decisions; Promotions
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage

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