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CEO decision horizon and firm performance: An empirical investigation

  • Antia, Murad
  • Pantzalis, Christos
  • Park, Jung Chul
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    We investigate the effect of top managers' myopia on firms' market valuation. We devise a measure of expected CEO tenure as a proxy for the length of CEO decision horizon. After accounting for the endogenous nature of CEO horizon, our empirical tests show that shorter CEO horizon is associated with more agency costs, lower firm valuation and higher levels of information risk. The results are consistent with the notion that a short CEO decision horizon is indicative of preference for investments that offer relatively faster paybacks at the expense of long-term value creation.

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    File URL: http://www.sciencedirect.com/science/article/pii/S0929-1199(10)00006-4
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    Article provided by Elsevier in its journal Journal of Corporate Finance.

    Volume (Year): 16 (2010)
    Issue (Month): 3 (June)
    Pages: 288-301

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    Handle: RePEc:eee:corfin:v:16:y:2010:i:3:p:288-301
    Contact details of provider: Web page: http://www.elsevier.com/locate/jcorpfin

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