Investigating the Reaction of Capital Market on Managerial Myopia in Companies Listed on Tehran Stock Exchange

Document Type : Research Paper

Authors

1 Ph.D. Student of Financial Management, University of Tehran, Kish International Campus, Iran

2 Assistant Prof. of Financial Management, Faculty of Management and Accounting, Shahid Beheshti University, Tehran, Iran

Abstract

Objective: In manager myopia, long-term profitability of the firm through reducing the research and development activities, marketing and activities which are costly in the early years are determined, have been sacrificed in order to achieve the short-term profit and enhanced current-term stock price. The purpose of this study is to examine the reaction of Capital Market to managerial myopia and theimpacts of the existence of institutional investorson listed companies in Tehran Stock Exchange (TSE).
Methods: Using systematic elimination method, 170 companies were selected from among the companies listed in TSE during 2007 to 2016. In this study, reaction of the capital market is measured based on abnormal return criteria.
Results: The results of the first hypothesis showed that the F-value is 2.942, its level of significance is set at 0.000 and the determination coefficient was measured 0.146; besides, T-value and level of significance for managerial myopia were reported 0.165 and 0.869 respectively. Based on the results of the second hypothesis, F-value, level of significance and the determination coefficient for the companies with organizational investors are reported 2.652, 0.000 and 0.085 respectively; and the F-value, level of significance and the determination coefficient for the companies with non-organizational investors are reported 3.181, 0.000 and 0.098. Finally, T-value and level of significance for managerial myopia were reported 1.331 and 0.183 for the first group and 0.776 and 0.436 for the second group, respectively. 
Conclusion: The results indicated that the presence or absence of institutional investors among the stakeholders does not have any significant effect on the relationship between abnormal returns and manager’s myopia. In addition, there is no  significant effect of capital market reaction on myopia managers. At last, as expected there is a negatively significant relationship between managers’ myopia and abnormal returns.

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References

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Financial Research Journal
Volume 20, Issue 1
2018
Pages 91-106

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