Managerial Myopia and Product Market Reputation: Evidence from Amazon.com Reviews

32 Pages Posted: 23 Sep 2018

See all articles by Tyson D. Van Alfen

Tyson D. Van Alfen

University of Kentucky, Gatton College of Business and Economics, Department of Finance & Quantitative Methods

Date Written: August 1, 2018

Abstract

Using a novel dataset of customer reviews from Amazon.com, I study the impact of managerial myopia on product market reputation. Using exogenous variation due to the timing of CEO equity vesting events, I show that short-term incentive shocks predict declines in reputation. A changing product market lineup and a deterioration of existing products are two mechanisms through which reputation is affected. The effect is larger when the CEO has other short-term concerns and when the firm has a low reputation in the product market. However, higher advertising expenses mitigate the negative reputational effect among consumers. Using an alternative empirical methodology, I find that higher short-term ownership in the firm is also associated with declining product market reputation, while higher long-term ownership is associated with increasing reputation.

Keywords: Myopia, Product markets, Investment, Reputation

JEL Classification: D22, G30, L14, M12

Suggested Citation

Van Alfen, Tyson D., Managerial Myopia and Product Market Reputation: Evidence from Amazon.com Reviews (August 1, 2018). Available at SSRN: https://ssrn.com/abstract=3242845 or http://dx.doi.org/10.2139/ssrn.3242845

Tyson D. Van Alfen (Contact Author)

University of Kentucky, Gatton College of Business and Economics, Department of Finance & Quantitative Methods ( email )

Lexington, KY 40506
United States

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