Managerial myopia and sustainability performance

Abstract

This thesis aims to enhance the understanding of managerial myopia and its impact on firms’ sustainability performance. This is accomplished by performing three interrelated papers along with introductory and concluding chapters. These research papers present three connected topics: (i) a systematic literature review of the existing empirical studies exploring the effect of managerial myopia on sustainability performance; (ii) the impact of CEO myopia on environmental and social performance: the moderating role of long-term incentives; and (iii) CEO myopia and economic performance: the triple bottom line perspective on incentives and sectoral differences.
The first research paper performs a systematic literature review to explore the impact of managerial myopia on sustainability performance. Despite the increasing number of recent empirical works on the myopia-sustainability nexus, review articles in this area are rare. Consequently, the final sample of this review includes 53 articles published in 38 scholarly journals between 2000 and 2023. The findings illustrate that measuring managerial myopia is quite challenging because myopia is an unobservable attribute of firm executives; therefore, this study explains how different governance factors lead companies or managers to behave myopically. In addition, most of the studies in this review focus on one or two dimensions, with a small number exploring the three dimensions (economic, environmental, and social) of sustainability performance. These findings provide a systematic overview of the causes of myopia, explain how it impacts various sustainability dimensions, and offer directions for future research.
The second research paper empirically investigates the impact of CEO myopia on firms’ non-financial outcomes and examines the moderating role of long-term incentives. Drawing on upper-echelon theory and stakeholder theory, the paper examines a sample of listed S&P 1500 firms, comprising 11,828 firm-year observations, spanning the period from 2002 to 2022. As a proxy for managerial myopia, this paper uses an industry-adjusted measure that combines CEOs’ expected tenure and age. The paper provides strong evidence for a significant negative relationship between CEO myopia and environmental and social performance, hence making a significant contribution to the ongoing debate about the consequences of myopic behaviour. Furthermore, the paper demonstrates that long-term incentives help mitigate the negative impact of CEO myopia on environmental and social performance, showing that these incentives are effective in limiting CEOs’ myopic behaviour.
The third paper examines the impact of CEO myopia on economic performance, the moderating role of long-term incentives, the mediating role of environmental and social initiatives and conducts a sector-based analysis. Through the lens of upper-echelon theory and stakeholder-agency theory, this paper empirically tests a sample from the S&P 1500 index-listed firms during the period from 2002 to 2022 with 11,828 firm-year observations. The results suggest that CEO short-termism is detrimental to corporate economic sustainability from the perspective of the triple bottom line approach. First, CEO myopia is significantly and negatively related to economic performance, with the effect varying between financial and non-financial firms. Second, environmental and social performance mediates the relationship between myopia and economic performance. This aligns with the SDGs perspective, which states that economic sustainability depends on advancements in environmental and social dimensions. Finally, long-term incentives effectively moderate the relationship between myopia and firms’ economic performance. In terms of the difference between the two sectors, there is a significant difference between financial and non-financial firms; namely, the impact is greater among the financial firms.
Keywords: managerial myopia; sustainability performance; economic performance; environmental performance; social performance; corporate governance; systematic literature review; triple bottom line; long-term incentives; moderating role; mediating role; financial firms; non-financial firms; upper-echelon theory; stakeholder theory; stakeholder-agency theory

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ORCID for Ven Tauringana: orcid.org/0000-0002-1433-324X

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