Does institutional short-termism matter with managerial myopia?

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 hori...

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Bibliographic Details
Published in:Journal of business research 2015-04, Vol.68 (4), p.845-850
Main Authors: Chen, Yu-Fen, Lin, Fu-Lai, Yang, Sheng-Yung
Format: Article
Language:English
Subjects:
Earnings
Earnings forecasting
Institutional investments
Institutional short-termism
Investment
Investment horizon
Management theory
Managerial myopia
Managers
Organizational behavior
Organizational behaviour
Portfolio turnover
R&D
R&D expenses
Research & development
Research & development expenditures
Research and development
Studies
U.S.A
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Summary: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.
ISSN:0148-2963
1873-7978
DOI:10.1016/j.jbusres.2014.11.039