Managerial myopia and outward foreign direct investment: Evidence from Chinese listed firms

Abstract Previous literature has studied the effect of managers' attributes on firms' outward foreign direct investment (OFDI). However, this extant literature ignored the role of managerial myopia. We use a sample of Chinese listed companies to examine the impact of managerial myopia on firms' OFDI. Based on the MD&A disclosure of firms, we use textual analysis and machine learning technology to measure managerial myopia. The result shows that managerial myopia has a negative impact on firms' OFDI. The cross‐sectional analysis results shows that the effect of managerial myopia on firms' OFDI is concentrated in firms with low financial constraints, technology‐intensive firms, and non‐state‐owned enterprises. Further analysis indicates that managerial short‐term performance pressure and corporate risk‐taking, respectively, strengthen and weaken the negative impact of managerial myopia on firms' OFDI. Our results suggest that managerial myopia will hinder a firm's international expansion. Therefore, firms committed to international expansion should also consider the long‐horizon vision of managers when appointing senior managers.