Managerial Short-termsim, Board Gender Diversity, Analyst Coverage And Their Effects On CSP

Abstract

While commentators have long decried managerial short-termism, no prior research has examined the deleterious effects of managerial short-termism on corporate social performance (CSP), nor how to ameliorate that negative effect. Moreover, due to the difficulty of unobtrusively measuring what is fundamentally a cognition in firms, empirical evidence at the organizational level of short-termism’s effect on firm outcomes is relatively sparse. Here, we measure managerial short-termism by content analyzing firms’ publicly filed annual reports (10-Ks). Using a combined dataset for 1,703 U.S. firms for the period 2000-2013, we show that managerial short-termism is negatively associated with CSP. However, we also show that this effect can be reduced through increased monitoring by important stakeholders who value CSP, specifically through increasing board gender diversity and analyst coverage.