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Does institutional short-termism matter with managerial myopia?

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  • Chen, Yu-Fen
  • Lin, Fu-Lai
  • Yang, Sheng-Yung

Abstract

Literature regarding the impact of institutional investors on firm's research and development (R&D) expenses supports that institutional ownership facilitates managerial discretion on R&D expenses in the US. However, the scenario may change when considering institutional investment horizon. This study investigates whether managerial myopic investments on R&D exist in an emerging market, Taiwan, and whether institutional investing exacerbates managerial myopic behavior. Results indicate that corporate managers cut R&D spending to meet short-term earnings goals in Taiwan. Domestic institutional short-termism will intensify managerial myopia. Conversely, foreign institutional ownership acts as a buffer to facilitate R&D.

Suggested Citation

  • Chen, Yu-Fen & Lin, Fu-Lai & Yang, Sheng-Yung, 2015. "Does institutional short-termism matter with managerial myopia?," Journal of Business Research, Elsevier, vol. 68(4), pages 845-850.
    • Handle: RePEc:eee:jbrese:v:68:y:2015:i:4:p:845-850
    DOI: 10.1016/j.jbusres.2014.11.039
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