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Managerial myopia, financial expertise, and executive-firm matching

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  • Anjos, Fernando
  • Kang, Chang-Mo

Abstract

Existing literature emphasizes skills-based explanations for executive-firm matching, namely in the context of financial expertise. In contrast, our paper argues that informational concerns may also be relevant. We model a public firm with a project opportunity of uncertain quality, where long-run shareholders choose between hiring an operational manager or a financial expert. These managers are equally myopic, however financial experts are also privy to stock-market beliefs. Financial experts invest sub-optimally due to catering incentives, while operational managers tend to engage in signaling-driven overinvestment. We show that operational managers are preferred for low-NPV projects or when stock markets are well informed.

Suggested Citation

  • Anjos, Fernando & Kang, Chang-Mo, 2017. "Managerial myopia, financial expertise, and executive-firm matching," Journal of Corporate Finance, Elsevier, vol. 43(C), pages 464-479.
    • Handle: RePEc:eee:corfin:v:43:y:2017:i:c:p:464-479
    DOI: 10.1016/j.jcorpfin.2017.02.010
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    References listed on IDEAS

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    Cited by:

    1. Gu, Leilei, 2023. "Executives’ financial experience and myopic marketing management: A myopic loss-aversion perspective," Journal of Business Research, Elsevier, vol. 157(C).
    2. Ștefan VLĂDUȚESCU, 2019. "Managerial Style, Determinations And Risks," Social Sciences and Education Research Review, Department of Communication, Journalism and Education Sciences, University of Craiova, vol. 6(2), pages 115-130, November.

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    More about this item

    Keywords

    Managerial myopia; Catering; Financial expertise; Executive-firm matching;
    All these keywords.

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies

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