Implication of Myopic Behavior on Firm Financial Performance: Evidence from PSX Listed Companies

Abstract

The role of the top manager in any organization is to take strategic decisions for the betterment and increasing the worth of any organization. In making these decisions, their selection of the best strategy is affected by different factors, from relevant stakeholders. Due to the emergence of corporate culture and the listing of firms on stock markets, the managers face enormous pressures to deliver better short-term results. The stock market forces and the quarterly financial result requirements are inducing myopic managerial decisions.

The pertinent determinants of managerial myopia include CEO expertise, Top Management Team (TMT) Size, Inside/Outside CEO, and Discretionary expenses. We took panel data of 251 firms listed on the Pakistan Stock Exchange (PSX) for the year 2009 till 2018 and examined the impact of the above myopic determinants on the performance of organizations in the context of Pakistan. The results indicate that managerial myopia exists in Pakistan, which has an effect on profitability and efficiency of firms.