Stock Overvaluation, Management Myopia, and Long-Term Firm Performance

Jialin Song, Luyu Wang (), Sihong Wu and Yiyi Su ()
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Jialin Song: School of Economics and Management, Tongji University, 1 Zhangwu Road, Shanghai 200092, China
Luyu Wang: Mobile Payment Department, China UnionPay, 1899 Guozhan Road, Shanghai 200135, China
Sihong Wu: Department of Management and International Business, University of Auckland, 12 Grafton Road, Auckland 1010, New Zealand
Yiyi Su: School of Economics and Management, Tongji University, 1 Zhangwu Road, Shanghai 200092, China

JRFM, 2024, vol. 17, issue 4, 1-18

Abstract: How does stock overvaluation in secondary financial markets affect long-term firm performance when significant corporate “insiders” seek to realize self-benefit? Using a sample of Chinese listed companies from 2007 to 2018, we find that overvaluation of stock price has a negative impact on long-term firm performance. Moreover, our results show that management myopia mediates the relationship between stock overevaluation and long-term performance. Our study enriches the discussion of stock overvaluation and extends the management myopia literature by considering unique aspects of the irrational behavior of firm decision makers, providing implications for governments to improve their capital market reform and development.

Keywords: stock overvaluation; management myopia; capital market; long-term firm performance (search for similar items in EconPapers)
JEL-codes: C E F2 F3 G (search for similar items in EconPapers)
Date: 2024
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