Myopia in investment: Seasoned manager’s age and long-term investment distortion

Muhammad Madyan, Bayu Indra Kurniawan, Novian Abdi Firdausi


Myopia in financial terms is included in the discussion of short-termism in investments. This study analyzes the effect of managerial age on investment policies taken by the top-level management with controlled variables consists of investment opportunity, firm size, profitability, leverage, and firm year effect. This study uses a fixed effect model estimation with data samples containing secondary data from 52 manufacturing firms listed in BEI. Data samples are selected through a purposive sampling method to filter and choose data that fit the study criteria. Study results show that the seasoned manager’s age has a negative and significant effect on long term investment, which implies that the older the seasoned manager’s age could increase the tendency of investment myopia. Controlled variables such as investment opportunity and firm size have a positive effect on long term investment, while the firm-year effect factor of 2013 and 2014 have positive effects but insignificant effect on long term investment.

JEL Classification: D29, G32, G39, G41



Firm size, Investment myopia, Investment opportunity, Leverage, Profitability, Seasoned manager’s age


Ariffianto, M., & Adhariani, D. (2017). Determinan sisa anggaran dalam APBD di Indonesia melalui sudut pandang perilaku budgetary slack. Proceedings. Simposium Nasional Akuntansi (SNA) XX. Jember.

Asker, J., Farre-Mensa, J., & Ljungqvist, A. (2014). Corporate investment and stock market listing: A puzzle? The Review of Financial Studies, 28(2), 342–390.

Benartzi, S., & Thaler, R. H. (1999). Risk aversion or myopia? Choices in repeated gambles and retirement investments. Management Science, 45(3), 364-381.

Chang, H., & Song, F. M. (2014). R&D investment and capital structure. Proceedings. Annual Conference. European Financial Management Association (EFMA).

Chevalier, J., & Ellison, G. (1999). Career concerns of mutual fund managers. The Quarterly Journal of Economics, 114(2), 389–433.

Choi, J., & Lee, J. (2017). Firm size and compositions of R&D expenditures: evidence from a panel of R&D performing manufacturing firms. Industry and Innovation, 25(5), 459-481.

Chowdhury, J. (2011). Managerial myopia: A new look. SSRN Electronic Journal.

Christanti, N., & Mahastanti, L. A. (2011). Faktor-faktor yang dipertimbangkan investor dalam melakukan investasi. Jurnal Manajemen Teori dan Terapan, 4(3), 37-51.

Darrough, M. N. (1987). Managerial incentives for short-term results: A comment. The Journal of Finance, 42(4), 1097–1102.

Docherty, P., & Hurst, G. (2018). Investor myopia and the momentum premium across international equity markets. Journal of Financial and Quantitative Analysis, 53(6), 2465-2490.

Garel, A. (2017). Myopic market pricing and managerial myopia. Journal of Business Finance & Accounting, 44(9-10), 1194-1213.

Ghosh, S. (2012). Does R&D intensity influence leverage? Evidence from Indian firm-level data. MPRA Paper 38945. University Library of Munich, Germany.

Graham, J. R., Harveya, C. R., & Rajgopal, S. (2005). The economic implications of corporate financial reporting. Journal of Accounting and Economics, 40(1-3), 3-37.

Guidara, R., & Boujelbene, Y. (2015). R&D expenditures and earnings targets: Evidence from France. Journal of Economics Finance and Accounting, 2(2). 164-180.

Hart, O. (2009). Hold-up, asset ownership, and reference points. The Quarterly Journal of Economics, 124(1), 267-300.

Hidayat, R. (2017). Teori myopic loss aversion: Sebuah telaah keuangan keperilakuan investasi investor di pasar modal. SEGMEN Jurnal Manajemen dan Bisnis, 13(2), 83-102.

Hovakimian, G. (2009). Determinants of investment cash flow sensitivity. Financial Management, 38(1), 161-183.

Jacobs, M. (1991). Short-term America: The causes and the cures of our business myopia. Published by Harvard Business School Press.

Kim, J., Kim, Y., & Flacher, D. (2012). R&D investment of electricity-generating firms following industry restructuring. Energy Policy. 48, 103-117.

Kurniawan, A. P., & Mertha, I. M. (2016). Kinerja keuangan sebagai pemediasi pengaruh intensitas research and development dan aset tidak berwujud pada nilai perusahaan. E-Jurnal Akuntansi, 14(1), 723-750.

Love, J. H. (2010). Opportunism, hold-up and the (contractual) theory of the firm. Journal of Institutional and Theoretical Economics, 166(3), 479-501.

Lundstrum, L. L. (2002). Corporate investment myopia: a horserace of the theories. Journal of Corporate Finance, 8(4), 353-371.

Min, B. S., & Smyth, R. (2016). How does leverage affect R&D intensity and how does R&D intensity impact on firm value in South Korea? Journal Applied Economics, 48(58), 5667-5675.

Mustaruddin, M., Dinata, A., Wendy, & Azazi, A. (2017). Asymmetric information and capital structure: Empirical evidence from Indonesia Stock Exchange. International Journal of Economics and Financial Issues, Econjournals, 7(6), 8-15.

Narayanan, M. P. (1987). Managerial incentives for short-term results: A reply. The Journal of Finance, 42(4), 1103–1104.

Noe, T. H., & Rebello, M. J. (1997). Renegotiation, investment horizons, and managerial discretion. The Journal of Business, 70(3), 385-407.

Park, S. (2011). R&D intensity and firm size revisited. University of California. Los Angeles.

Reilly, G., Souder, D., & Ranucci, R. (2016). Time horizon of investments in the resource allocation process: Review and framework for next steps. Journal of Management, 42(5), 1169-1194.

Savin, N. E., & White, K. J. (1977). The Durbin-Watson Test for serial correlation with extreme sample sizes or many regressors. Econometrica, 45(8), 1989-1996.

Serfling, Matthew A. (2014). CEO Age and The Riskiness of Corporate Policies. Journal of Corporate Finance. 25, 251-273.

Spescha, A. (2018). R&D expenditures and firm growth – is small beautiful? Economics of Innovation and New Technology, 28(2), 156-179.

Stein, J. C. (1989). Efficient capital markets, inefficient firms: A model of myopic corporate behavior. The Quarterly Journal of Economics, 104(4), 655-669.

Talbi, D. (2017). CEO age and risk-taking behavior. Euro-Asian Journal of Economics and Finance, 5, 72-82.

Thakor, A. V. (1990). Investment "myopia" and the internal organization of capital allocation decisions. Journal of Law, Economics, & Organization, 6(1), 129-154.

Thakor, A. V. (1993). Information, investment horizon, and price reactions. Journal of Financial and Quantitative Analysis, 28(4). 459-482.

Wendy & Asri, M. (2012). Psychological biases in investment decisions: An experimental study of myopic behavior in developing capital markets. Journal of Indonesian Economy and Business, 27(2), 143-158.

Xu, J., & Jin, Z. (2016). Research on the impact of R&D investment on firm performance in China's internet of things industry. Journal of Advanced Management Science, 4(2), 112-116.

Full Text: PDF


  • There are currently no refbacks.



Jurnal Keuangan dan Perbankan (Journal of Finance and Banking)

Diploma Program of Banking and Finance, Faculty of Economics and Business, University of Merdeka Malang

Published by University of Merdeka

Mailing Address:

2nd floor Finance and Banking Building, Jl. Terusan Raya Dieng No. 57 Malang, Indonesia
Phone: +628123321664

This work is licensed under a Creative Commons Attribution-ShareAlike 4.0