Do company visits by institutional investors mitigate managerial myopia in R&amp;D investment? Evidence from China

Luo, Yonggen; Wu, Huiying; Ying, Sammy Xiaoyan; Peng, Qiuping

doi:10.1016/j.gfj.2021.100694

Cited by 15 publications

(4 citation statements)

References 57 publications

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“…However, this way has problems such as a low response rate and subjective cognitive bias. Some literature uses R&D investment to measure managerial myopia (Chintrakarn et al, 2016; Li et al, 2019; Luo et al, 2022; Zhu et al, 2022), but it captures only observable post‐act and cannot directly reflect managers' actual cognition. With the development of data science, some management scholars use textual analysis to conduct research.…”

Section: Methodsmentioning

confidence: 99%

Managerial myopia and outward foreign direct investment: Evidence from Chinese listed firms

Dong,

Chen,

Guo

2023

Manage Decis Econ

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Previous literature has studied the effect of managers' attributes on firms' outward foreign direct investment (OFDI). However, this extant literature ignored the role of managerial myopia. We use a sample of Chinese listed companies to examine the impact of managerial myopia on firms' OFDI. Based on the MD&A disclosure of firms, we use textual analysis and machine learning technology to measure managerial myopia. The result shows that managerial myopia has a negative impact on firms' OFDI. The cross‐sectional analysis results shows that the effect of managerial myopia on firms' OFDI is concentrated in firms with low financial constraints, technology‐intensive firms, and non‐state‐owned enterprises. Further analysis indicates that managerial short‐term performance pressure and corporate risk‐taking, respectively, strengthen and weaken the negative impact of managerial myopia on firms' OFDI. Our results suggest that managerial myopia will hinder a firm's international expansion. Therefore, firms committed to international expansion should also consider the long‐horizon vision of managers when appointing senior managers.

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Section: Methodsmentioning

confidence: 99%

Managerial myopia and outward foreign direct investment: Evidence from Chinese listed firms

Dong,

Chen,

Guo

2023

Manage Decis Econ

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“…Reducing R&D expenditure in the short term may help to achieve short‐term profitability targets, but this may lead to a loss of innovation advantage in the long term and reduce the potential for long‐term growth. Finally, from the prior literature, many scholars have noticed the behaviour of managers cutting R&D expenditures to meet short‐term financial goals and have argued that such behaviour captures managerial myopia (Bushee, 1998; Chen et al, 2015; Luo et al, 2022; Osma & Young, 2009). There is also literature that uses textual analysis techniques to find that myopic managers reduce long‐term investments, including R&D (Brochet et al, 2015; Hu et al, 2021), again suggesting that cutting R&D expenditure can be a measure of managerial myopia to some extent.…”

Section: Methodsmentioning

confidence: 99%

“…To address concerns regarding omitted variables, we add control variables related to managerial characteristics ( Salary and Tenure ), ownership structure ( Top1 ), corporate governance ( Board ), firm value ( TobinQ ), and asset shape ( Intangible ) to the baseline model (Lai et al, 2020; Luo et al, 2022; Xiao et al, 2023). The results are shown in columns (1) and (2) of Table 7.…”

Section: Robustness Checkmentioning

confidence: 99%

“…Chen et al (2015) revealed that CEO contract protection could prevent managers from cutting research‐and‐development (R&D) expenditures to maintain performance. Prior research also argues that institutional investors' shareholding and corporate visits can mitigate managerial myopia (Luo et al, 2022). Although many studies have analysed managerial myopic behaviour and investor interaction behaviour, fewer studies have noted the impact of investor interaction characteristics on managerial behaviour, especially myopic behaviour related to business performance.…”

Section: Introductionmentioning

confidence: 99%

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Pressure from words: The tone of investors in Chinese earnings communication conferences and managerial myopia

Luo,

2023

Accounting & Finance

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This study examines whether and how the negative tone of investors in earnings communication conferences (ECCs) held by Chinese listed companies influences managerial myopia. We use the bidirectional encoder representations from transformers (BERT) model to construct sentence‐level emotional tone and find that the negative tone of investors in ECCs leads to greater myopic behaviour by managers. The positive relationship between the negative tone of investors and managerial myopia is stronger when more investors participate in ECCs, investors ask more questions, and managers respond with longer statements. However, this positive relationship becomes weaker when managers have positions in other companies, managers are more competent, and managers display a more positive tone in ECCs. Additionally, this positive relationship weakens when listed companies that hold ECCs have more institutional investors and strengthens when the media reports these companies more frequently. Our results prove that individual investors can have a voice and influence the decision‐making behaviour of managers through ECCs.

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Do non‐controlling large shareholders affect corporate over‐financialization?: A shareholder hybrid perspective

Zhang

2023

Manage Decis Econ

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This study investigates the monitoring role of non‐controlling large shareholders (NCLS) on firms' over‐financialization. We compared over‐financialized firms with NCLS with those without. Our first finding suggests that firms with NCLS have a lower extent of over‐financialization. We also find that the hybridity between controlling shareholders and NCLS in a firm decreases over‐financialization. Additional analyses show that NCLS monitor over‐financialization by alleviating corporate myopia. Furthermore, our results reveal that over‐financialization decreases with the relative strength of NCLS compared to controlling shareholders, NCLS' number, and NCLS' shareholdings. Our conclusions remain valid after accounting for endogeneity and employing measures of over‐financialization.

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Do company visits by institutional investors mitigate managerial myopia in R&D investment? Evidence from China

Cited by 15 publications

References 57 publications

Managerial myopia and outward foreign direct investment: Evidence from Chinese listed firms

Managerial myopia and outward foreign direct investment: Evidence from Chinese listed firms

Pressure from words: The tone of investors in Chinese earnings communication conferences and managerial myopia

Do non‐controlling large shareholders affect corporate over‐financialization?: A shareholder hybrid perspective

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