Is managerial myopia detrimental to corporate ESG performance?

Zheng Lu, Yanzi Liang, Yanglin Hu and Yang Liu

International Review of Economics & Finance, 2024, vol. 92, issue C, 998-1015

Abstract: This study explores the nexus between managerial myopia and corporate Environmental, Social, and Governance (ESG) performance within the framework of China's A-share listed companies from 2010 to 2020. We provide a novel insight into how the temporal orientation of managerial decision-making significantly impacts ESG outcomes, highlighting the adverse effects of a short-term focus on sustainable corporate development. Using a robust dataset, we delineate the mechanisms through which managerial myopia undermines ESG performance, specifically in green innovation and corporate information disclosure quality. Further, it examines the efficacy of external governance mechanisms, such as the increased liquidity of stocks and the engagement of Big 4 accounting firms, as mitigating factors. The paper's methodology combines advanced regression analysis with propensity score matching to validate the causal relationship between managerial myopia and ESG performance, controlling for potential endogeneity and selection bias. The findings suggest that managerial myopia indeed poses a significant challenge to achieving high ESG standards, with implications for both policymakers and corporate governance practices. This study contributes to the broader discourse on corporate sustainability by linking managerial cognitive traits to ESG performance, with a specific focus on the Chinese market, thereby enriching the understanding of ESG dynamics in emerging economies.

Keywords: Myopia; ESG; Accounting information quality; Sustainable development; Financing constraints (search for similar items in EconPapers)
Date: 2024
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:92:y:2024:i:c:p:998-1015

DOI: 10.1016/j.iref.2024.02.061

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