Does CEO myopia impede growth opportunities?

Murad Antia (), Christos Pantzalis () and Jung Chul Park ()
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Murad Antia: University of South Florida
Christos Pantzalis: University of South Florida
Jung Chul Park: University of South Florida

Review of Quantitative Finance and Accounting, 2021, vol. 56, issue 4, No 10, 1503-1535

Abstract: Abstract We present evidence that the negative impact of CEO short-termism on firm value can be attributed to a sub-optimal exercise of real options. Accordingly, the value relevance of firms’ real options portfolios is maximized in the absence of CEO temporal myopia. Moreover, the impact of real options on firms’ stock returns’ idiosyncratic characteristics is more pronounced when CEOs’ decision horizons are longer, in line with the view that enhanced operating flexibility from longer decision horizons can amplify the convexity of real options’ payoffs. These findings have important implications regarding the impact of CEO career horizons on corporate strategies and board decisions related to CEO incentives and succession.

Keywords: Real options; Managerial myopia; CEO decision horizon; Agency theory; Operating flexibility (search for similar items in EconPapers)
JEL-codes: G32 G34 G40 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (2)

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DOI: 10.1007/s11156-020-00934-5

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