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Managerial Myopia and Long-Term Investment: Evidence from China

Author

Listed:
  • Qilong Cao

    (Wu Jinglian School of Economics, Changzhou University, Changzhou 213164, China)

  • Meng Ju

    (Business School, Changzhou University, Changzhou 213164, China)

  • Jinglei Li

    (Business School, Changzhou University, Changzhou 213164, China)

  • Changbao Zhong

    (Wu Jinglian School of Economics, Changzhou University, Changzhou 213164, China)

Abstract

A corporation’s ability to uphold valuable long-term investments is a critical component of the business’s sustainability. Combining the views of the upper echelons theory and agency theory, this study argues that myopic managerial behavior is detrimental to a firm’s long-term investment. We construct an indicator assessing managerial myopia based on the textual analysis approach. The moderating effect analysis suggested that the negative impact of managerial myopia on long-term investments is lessened with an increase in institutional investor ownership and analyst coverage. In addition, we found that managerial myopia negatively correlates with capital expenditures and R&D investments. Furthermore, the cross-sectional analysis suggested that the correlation between managerial myopia and long-term investment is stronger among firms with higher industry competition, poor performance levels, and in non-state-owned enterprises.

Suggested Citation

  • 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.
    • Handle: RePEc:gam:jsusta:v:15:y:2022:i:1:p:708-:d:1020965
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