Myopic Management Theory and R&D Investment Decisions

44 Pages Posted: 1 Jan 2020

See all articles by Suresh Kumar Oad Rajput

Suresh Kumar Oad Rajput

Sukkur IBA University

Jahanzeb Marwat

Sukkur IBA University

Udomsak Wongchoti

Massey University - School of Economics and Finance

Date Written: November 21, 2019

Abstract

This study attempts to asses firms’ financial conditions to explain why they use myopic R&D cuts. Contrary to prior literature, this study shows that the current financial indicators of firms are also significant determinants of R&D myopic management along with stock market. Financial indicators such as Leverage, cash holding, earned-to-capital ratio, market-to-book ratio, sales growth, dividend, tangibility, age, and size of firms significantly influence the probability of being myopic firms and R&D investment decisions. Further, we show that U-shaped and inverted U-shaped relationship of different determinants of R&D investments provide a better description for mix results of prior literature.

Keywords: Myopic management, earnings management, R&D investment decision, financial resources, corporate investment and innovation

JEL Classification: G10, G11, G18, G19, O32

Suggested Citation

Oad Rajput, Suresh Kumar and Marwat, Jahanzeb and Wongchoti, Udomsak, Myopic Management Theory and R&D Investment Decisions (November 21, 2019). Available at SSRN: https://ssrn.com/abstract=3491115 or http://dx.doi.org/10.2139/ssrn.3491115

Suresh Kumar Oad Rajput (Contact Author)

Sukkur IBA University ( email )

SUKKUR IBA UNIVERSITY
SUKKUR, SINDH 65200
Pakistan
00923363322855 (Phone)
65200 (Fax)

Jahanzeb Marwat

Sukkur IBA University ( email )

Pakistan

Udomsak Wongchoti

Massey University - School of Economics and Finance ( email )

Private Bag 11-222
Palmerston North, 30974
New Zealand

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