The Effect of Managerial Myopia on the Adjustment Speed of the Company’s Financial Leverage towards the Optimal Leverage

Rostami, Vahab; Kargar, Hamed; Samimifard, Mahdis

doi:10.3390/jrfm15120581

Cited by 7 publications

(5 citation statements)

References 32 publications

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“…This finding also supports pecking order theory that companies with high profitability levels have low debt, because companies with high profitability have abundant internal funding. Rostami et al, 2022 also support this theory that corporates also have tendency to more employee own capital than outside resources if they can generate profitability more. This goal can be accepted if the board has smaller number to manage profitability and reduce the board cost about risk management (Faisal & Challen., 2021).…”

Section: Resultssupporting

confidence: 64%

“…Several factors that influence the level of company leverage include institutional ownership, asset structure, profitability, and company growth (Tarigan et al, 2022). The easier a company can generate profits, the more risk-taker it becomes in using debt financing (Rostami et al, 2022). H2.…”

Section: H1 Board Size Has Positive Effect On Leverage Moderating Rol...mentioning

confidence: 99%

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Board Size and Leverage in Indonesian’s Pharmaceutical Companies. The Moderating Role of Profitability

Sanga,

Hajanirina

2023

JPMS

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This empirical study examines the relationship between board size, leverage, and profitability in the pharmaceutical sector. Using a sample of pharmaceutical companies from 2019 to 2022, the study reveals that board size has a significant positive impact on leverage. Additionally, profitability acts as a moderator in the relationship between board size and leverage. The results indicate a significant negative relationship between board size and leverage when considering profitability, suggesting that larger boards in pharmaceutical companies are associated with lower levels of leverage. These findings contribute to the existing literature on corporate governance and financial performance, highlighting the significance of board size in shaping leverage decisions and influencing profitability. The study suggests that larger boards in the pharmaceutical sector exercise caution in managing debt, leveraging their enhanced monitoring capabilities, diverse expertise, and increased accountability. Policymakers, industry practitioners, and investors can use these insights to make informed decisions regarding board composition, financing strategies, and evaluating the financial performance and risk profiles of pharmaceutical companies.

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Section: Resultssupporting

confidence: 64%

Section: H1 Board Size Has Positive Effect On Leverage Moderating Rol...mentioning

confidence: 99%

Board Size and Leverage in Indonesian’s Pharmaceutical Companies. The Moderating Role of Profitability

Sanga,

Hajanirina

2023

JPMS

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“…First, we investigate the long-term real effects of stock overvaluation in secondary markets. It is imperative that firms focus on the long run, which shows better capability in resisting environmental threats and achieving sustainable development (Cao et al 2022;Rostami et al 2022), and this supplements existing literature on firm performance. Second, based on the information role raised by Bond et al (2012), this study considers equity sold by corporate insiders and slower R&D growth as new mediators, which is distinguished from previous research that mainly focuses on overinvestment.…”

Section: Introductionmentioning

confidence: 88%

Stock Overvaluation, Management Myopia, and Long-Term Firm Performance

Song,

Wang,

et al. 2024

JRFM

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How does stock overvaluation in secondary financial markets affect long-term firm performance when significant corporate “insiders” seek to realize self-benefit? Using a sample of Chinese listed companies from 2007 to 2018, we find that overvaluation of stock price has a negative impact on long-term firm performance. Moreover, our results show that management myopia mediates the relationship between stock overevaluation and long-term performance. Our study enriches the discussion of stock overvaluation and extends the management myopia literature by considering unique aspects of the irrational behavior of firm decision makers, providing implications for governments to improve their capital market reform and development.

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“…The optimality of financial leverage is of great importance because optimal financial leverage can bring maximum value to shareholders. The short-sightedness of managers (they prefer short-term goals and profits of the firm over long-term planning) has an adverse effect on the speed of convergence of financial leverage in the optimal level (Rostami et al, 2022). The amount of equity is a limiting factor for firm growth.…”

Section: Theoretical Backgroundmentioning

confidence: 99%

Financial management of the company. Are there differences of opinion between owners and managers in the SME segment?

Belas,

Rahman

2023

JOBS Journal

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Research background: Financial management of small and medium-sized enterprises is an important area of corporate governance. The quality of financial management has a significant impact on the sustainability and development of these enterprises. In this context, there is a scientific interest to investigate how aspects of financial management are perceived by business owners and how they are considered by business managers. Purpose of the article: The aim of the article is to define and quantify the important attitudes in the field of financial management and to make a comparison of the attitudes of owners and managers of SMEs in this area. Methods: In order to achieve this objective, an empirical research was conducted to investigate the attitudes of small and medium-sized firms in the area of financial management, was conducted in June 2022 in the Czech Republic and Slovakia. In the Czech Republic, the total number of respondents was 347, of which 170 (49.0%) were owners and 177 (51.0%) were managers in senior management positions. In the Slovak Republic, the total number of respondents was 322, of which 179 were owners and 143 were managers. Findings & Value added: The attitudes of owners and managers in understanding the most important aspects of financial management are relatively high in both countries, and these attitudes were similar. Perceptons of financial risk differ between owners and managers in the Czech Republic. Financial risk is better perceived in the category of managers than in the category of SMEs owners. The correct perception of financial risk in Slovakia is at a slightly higher level than in the Czech Republic, while the perception of owners and managers is very similar. Business owners in both countries confirmed that they are better able to manage financial risks in the firm than managers (however, these differences were not statistically significant). Managers in Czech firms were more positive about financial performance compared to owners (statistically significant difference). Similarly in Slovakia (however, this was a statistically insignificant difference). These findings may be inspiring for the scientific field and also for economic policy in these countries.

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The Effect of Managerial Myopia on the Adjustment Speed of the Company’s Financial Leverage towards the Optimal Leverage

Cited by 7 publications

References 32 publications

Board Size and Leverage in Indonesian’s Pharmaceutical Companies. The Moderating Role of Profitability

Board Size and Leverage in Indonesian’s Pharmaceutical Companies. The Moderating Role of Profitability

Stock Overvaluation, Management Myopia, and Long-Term Firm Performance

Financial management of the company. Are there differences of opinion between owners and managers in the SME segment?

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