Myopic Management Theory and R&D Investment Decisions
44 Pages Posted: 1 Jan 2020
Date Written: November 21, 2019
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: Suggested Citation