The Effect of Managerial Myopia on the Adjustment Speed of the Company’s Financial Leverage towards the Optimal Leverage
Abstract
:1. Introduction
2. Theoretical Principles of the Study
The Empirical Background of the Research
3. Research Methodology
3.1. Regression Model of Research
3.2. Operational Definitions of Research Variables
3.3. The Dependent Variable of the Research: The Adjustment Speed of Financial Leverage (SL)
3.4. The Research Control Variables
4. Research Findings
4.1. Descriptive Statistics of Research Variables
4.2. Descriptive Statistics of Qualitative Research Variables
4.3. Unit Root Test (Stability) of Variables
4.4. Tests Related to the Classical Hypothesis of Regression
4.5. The Result of the Research Hypothesis Test
5. Conclusions
5.1. Discussion and Suggestions
5.2. Research Limitations
Author Contributions
Funding
Data Availability Statement
Acknowledgments
Conflicts of Interest
References
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Group 1 | Group 2 | Group 3 | Group 4 |
---|---|---|---|
The difference in return on assets | The difference in return on assets | The difference in return on assets | The difference in return on assets |
Predicted with positive real | Predicted with positive real | Predicted with positive real returns | Predicted with negative real |
The difference in marketing and research and development costs | Only the difference of one between negative marketing or research and development costs | The difference in marketing and research and development costs | - |
Variable | Sign | Mean | Maximum | Minimum | Standard Deviation | Kurtosis | Skewness |
---|---|---|---|---|---|---|---|
Leverage adjustment speed | SL | 0.530 | 0.980 | 0.004 | 0.260 | −0.260 | 2.110 |
Liquidity ratio | Cash | 0.120 | 0.510 | −0.120 | 0.130 | 0.750 | 3.580 |
Board independence | Board ind | 0.650 | 1.000 | 0.000 | 0.170 | −0.210 | 3.090 |
Firm growth | BTM ratio | 5.650 | 15.870 | 1.000 | 4.790 | 1.080 | 2.870 |
Sales growth | Growth | 0.290 | 1.320 | −0.390 | 0.380 | 0.740 | 3.430 |
Institutional ownership | INST | 60.280 | 98.110 | 0.000 | 30.840 | −0.850 | 2.400 |
Product market competition | PMC | 0.0750 | 0.980 | 0.000 | 0.210 | 3.510 | 14.280 |
Return on assets | ROA | 0.130 | 0.590 | −0.170 | 0.140 | 0.760 | 3.620 |
Firm size | SIZE | 14.480 | 19.770 | 11.030 | 1.490 | 0.870 | 4.200 |
Variable | Sign | Description | Frequency | Frequency Percentage |
---|---|---|---|---|
Myopic managers | MYO | 1 | 441 | 35.560 |
Non-myopic managers | MYO | 0 | 799 | 64.440 |
Companies with political connections | STATE | 1 | 503 | 40.560 |
Companies without political connections | STATE | 0 | 737 | 59.440 |
Total | - | - | 1240 | 100 |
Variable | Sign | Mean | Maximum | Results |
---|---|---|---|---|
Leverage adjustment speed | SL | −13.906 | 0.000 | Stationary |
Liquidity ratio | Cash | −17.102 | 0.000 | Stationary |
Board Independence | Board ind | −10.083 | 0.000 | Stationary |
Firm growth | BTM ratio | −13.837 | 0.000 | Stationary |
Sales growth | Growth | −14.563 | 0.000 | Stationary |
Institutional ownership | INST | −13.458 | 0.000 | Stationary |
Product market competition | PMC | −75.024 | 0.000 | Stationary |
Return on assets | ROA | −12.980 | 0.000 | Stationary |
Firm size | SIZE | −14.633 | 0.000 | Stationary |
Test | Test Statistic | Significance Level | Test Result |
---|---|---|---|
F. Limer | 1.840 | 0.000 | Admitting panel data pattern |
Hausman | 27.763 | 0.002 | Fixed effects of intercept |
White’s test | 159.710 | 0.000 | Existence of heterogeneity of variance |
Breusch-Godfrey test | 22.169 | 0.000 | The existence of serial autocorrelation |
Normalization of model residuals | 35.788 | 0.000 | no normal distribution |
SLi,t = β0 + β1 MYOi,t + β2 STATEi,t + β3 Sizei,t + β4 ROAi,t + β5 PMCi,t + β6 INSTi,t + β7 Growthi,t + β8 CASHi,t + β9 BTM ratioi,t + β10 Board indi,t + εi,t | ||||||
Dependent Variable: Adjustment Speed of Financial Leverage | ||||||
Variables | Sing | Coefficient | Standard Error | t Statistic | Significance | VIF |
Managerial myopia | MYO | −0.030 | 0.010 | −3.060 | 0.002 | 1.150 |
Political relation | STATE | 0.009 | 0.009 | 0.980 | 0.320 | 1.160 |
Firm | SIZE | −0.002 | 0.003 | −0.780 | 0.430 | 1.200 |
Return on assets | ROA | 0.410 | 0.040 | 10.040 | 0.000 | 1.630 |
Product market competition | PMC | 0.067 | 0.019 | 3.430 | 0.000 | 1.020 |
Institutional ownership | INST | −0.000 | 0.000 | −5.780 | 0.000 | 1.220 |
Sales growth | Growth | −0.032 | 0.015 | −2.090 | 0.036 | 1.360 |
Liquidity ratio | Cash | −0.020 | 0.035 | −0.570 | 0.560 | 1.380 |
Firm growth | BTM ratio | −0.005 | 0.001 | −3.600 | 0.000 | 1.100 |
Board independence | Board ind | 0.019 | 0.023 | 0.820 | 0.410 | 1.040 |
Intercept | 0.600 | 0.054 | 11.130 | 0.000 | - | |
The adjusted coefficient of determination | 0.300 | |||||
Durbin-Watson | 2.280 | |||||
F statistic | 3.615 | |||||
Significance level | 0.000 |
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Rostami, V.; Kargar, H.; Samimifard, M. The Effect of Managerial Myopia on the Adjustment Speed of the Company’s Financial Leverage towards the Optimal Leverage. J. Risk Financial Manag. 2022, 15, 581. https://doi.org/10.3390/jrfm15120581
Rostami V, Kargar H, Samimifard M. The Effect of Managerial Myopia on the Adjustment Speed of the Company’s Financial Leverage towards the Optimal Leverage. Journal of Risk and Financial Management. 2022; 15(12):581. https://doi.org/10.3390/jrfm15120581
Chicago/Turabian StyleRostami, Vahab, Hamed Kargar, and Mahdis Samimifard. 2022. "The Effect of Managerial Myopia on the Adjustment Speed of the Company’s Financial Leverage towards the Optimal Leverage" Journal of Risk and Financial Management 15, no. 12: 581. https://doi.org/10.3390/jrfm15120581