The impact of manager conservatism on innovation and capital expenditures: the role of the crisis caused by the covid-19 outbreak

Abstract

Purpose The present study aims to investigate the impact of manager conservatism on innovation and capital expenditures especially the moderating role of the crisis caused by the COVID-19 outbreak for companies listed on the Tehran Stock Exchange (TSE). Design/methodology/approach The present study investigated information about 178 companies in 2014–2022. In this study, the CEO’s signature was a psychological proxy of conservatism. Modified multiple regression analysis was used to investigate the moderating role of COVID-19. The present study also used the Generalized Method of Moments (GMM) to address endogeneity issues. Findings The results showed that manager conservatism has a positive and significant effect on capital expenditures, while manager conservatism negatively impacts firm innovation. In addition, COVID-19 significantly strengthens the impact of manager conservatism on capital expenditures and firm innovation. Hypothesis testing based on robustness checks confirmed these results. Originality/value This study aims to investigate the impact of manager conservatism, as a personality trait, on capital expenditures and innovation. These aspects have not been thoroughly explored in the existing literature. Additionally, it is important to consider the perceived threat of COVID-19, known to have a greater effect on conservatives. This study seeks to examine the interactive role of manager conservatism and COVID-19 on investment in capital expenditures and innovation. The present findings will not only benefit managers and policymakers in both developing and developed countries but will also provide valuable insights into decision-making processes related to capital expenditures and innovation during critical conditions such as the COVID-19 outbreak.