Project

Short-termism

Updates
0 new
0
Recommendations
0 new
0
Followers
0 new
2
Reads
0 new
16

Project log

Garel Alexandre
added a research item
This paper develops a firm-level measure of myopic market pricing, which captures the extent to which the market overvalues short-term expected abnormal earnings relative to longer-term ones. The empirical analysis shows that myopically priced firms manage earnings more actively and invest less in R&D. The impact of myopic market pricing is concentrated in firms where managers cater more to market pricing, that is, in firms with greater short-term investor ownership, with CEO compensation that is more sensitive to the firm share price, and with higher equity dependence. Additional tests show that these findings are robust to the consideration of market (under)overpricing. The results suggest that when managers cater to market pricing, market myopia encourages managerial myopia.