Managerial myopia and firm productivity: Evidence from China

Abstract

This paper examines the effect of managerial myopia on firm productivity using a sample of Chinese public firms. Using a text-based measure of managerial myopia, we find that firms whose managers care more about the short term have lower total factor productivity due to a reduction in innovation activities. The finding is robust after using local gambling preference as an instrument variable for managerial myopia. Moreover, the impact of myopia on productivity is concentrated in firms with weaker monitoring, a higher need for external funds, and greater environmental uncertainty. The results indicate that managerial myopia adversely affects a firm's real performance.