The Effect of Managers Myopia on Investors Behavior in the Capital Market

Subject Areas : Financial engineering

seyed hamed naghibi esfahani ¹ , Mohammadreza Abdoli ²

1 - Department of accounting- Faculty of Humanities- shahrood branch-islamic azad university- shahrood- iran
2 - Associate professor, Department of Accounting, Islamic Azad University, Shahrood Branch, Shahrood, Iran

Received: 2017-07-26 Accepted : 2017-10-22 Published : 2017-12-22

Keywords: manager’s myopia, expert shareholder, capital market reaction,

Abstract :

This research aims to measure the stock market reaction to the manager’s myopia. Manager myopia tends to increase the current stock prices and inflate the current profitability by decreasing long term profitability or increasing cash flows. The statistical population of this research is all companies listed on Tehran Stock Exchange during the years 1385 to 1394 (Hijri calendar). After applying some filters and restrictions, 117 companies were selected and investigated. The results indicate that myopia does not have a significant negative impact on abnormal returns, obtained at the time of profit report. Overall results indicate that the capital market in the form of efficiency (stocks and time of profit report) don’t have significant reaction to manager’s myopia. In the same time, manager’s myopia has a positive significant effect on return on future assets, as a measure of future financial performance. In summary, the results indicate that the capital market doesn’t react to manager’s myopia but manager’s myopia affects future financial performance of investigated companies.