Do Capital Markets Punish Managerial Myopia? Evidence from Myopic Research and Development Cuts

JY Tong, FD Zhang

科研成果: 期刊稿件期刊论文

摘要

The literature provides conflicting arguments and mixed results regarding whether capital markets punish managerial myopia. Using managers cutting research and development (R&D) investments to meet short-term earnings goals as a research setting, this study reveals that capital markets penalize managerial myopia, especially for firms with high investor sophistication. Moreover, the negative market reactions to managerial myopia are weaker for firms with overinvestment problems than for those without such problems. Overall, the results support the notion that security markets are not shortsighted. In further analysis, we document that compensation, especially earnings-based compensation, may cause managers to behave myopically. Our study contributes to the literature, reconciling previously mixed findings by capturing managers’ myopic behavior in a more targeted way and showing that markets punish myopic R&D cutting.
源语言英语
页数30
期刊Journal of Financial and Quantitative Analysis
DOI
刊载前的电子出版物 - 6 12月 2023

成果物的来源

  • ABDC-A*
  • FT
  • SSCI

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