{"title":"Long-term firm gains from short-term managerial focus: Myopia and voluntary disclosures","authors":"Anil Arya , Ram N.V. Ramanan","doi":"10.1016/j.jacceco.2023.101646","DOIUrl":null,"url":null,"abstract":"<div><p>A CEO's short horizon and associated myopic actions are typically viewed as detrimental to the firm. In contrast, studying a voluntary disclosure model wherein capital market and product market strategic considerations are in play, we show that the CEO's myopic behavior can improve a firm's long-term value. In particular, the disclosures of a long-horizon CEO are seen as being entirely focused on the firm's interests and thus as being exploitative of customers. A short-horizon CEO myopically focused on short-term stock price is less aligned with the firm and, consequently, her disclosures are more customer friendly. As a corollary, when no disclosure is forthcoming, customers are less skeptical that the myopic CEO is withholding information to exploit them. This improves customers' willingness to pay with a myopic CEO, leading to higher firm profitability. The paper also layers in compensation design to derive the optimal degree of managerial short-term focus to induce.</p></div>","PeriodicalId":48438,"journal":{"name":"Journal of Accounting & Economics","volume":"77 2","pages":"Article 101646"},"PeriodicalIF":5.4000,"publicationDate":"2024-04-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Journal of Accounting & Economics","FirstCategoryId":"91","ListUrlMain":"https://www.sciencedirect.com/science/article/pii/S0165410123000708","RegionNum":1,"RegionCategory":"管理学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q1","JCRName":"BUSINESS, FINANCE","Score":null,"Total":0}
引用次数: 0
Abstract
A CEO's short horizon and associated myopic actions are typically viewed as detrimental to the firm. In contrast, studying a voluntary disclosure model wherein capital market and product market strategic considerations are in play, we show that the CEO's myopic behavior can improve a firm's long-term value. In particular, the disclosures of a long-horizon CEO are seen as being entirely focused on the firm's interests and thus as being exploitative of customers. A short-horizon CEO myopically focused on short-term stock price is less aligned with the firm and, consequently, her disclosures are more customer friendly. As a corollary, when no disclosure is forthcoming, customers are less skeptical that the myopic CEO is withholding information to exploit them. This improves customers' willingness to pay with a myopic CEO, leading to higher firm profitability. The paper also layers in compensation design to derive the optimal degree of managerial short-term focus to induce.
期刊介绍：
The Journal of Accounting and Economics encourages the application of economic theory to the explanation of accounting phenomena. It provides a forum for the publication of the highest quality manuscripts which employ economic analyses of accounting problems. A wide range of methodologies and topics are encouraged and covered: * The role of accounting within the firm; * The information content and role of accounting numbers in capital markets; * The role of accounting in financial contracts and in monitoring agency relationships; * The determination of accounting standards; * Government regulation of corporate disclosure and/or the Accounting profession; * The theory of the accounting firm.
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