Managerial myopia and the mortgage meltdown Academic Article uri icon

abstract

  • 2018 Prominent policy makers assert that managerial short-termism was at the root of the subprime crisis of 20072009. Prior scholarly research, however, largely rejects this assertion. Using a more comprehensive measure of Chief Executive Officer (CEO) incentives for short-termism, we uncover evidence that short-termism indeed played a role. Firms whose CEOs were contractually allowed to sell or exercise more of their stock and options holdings sooner had more subprime exposure, a higher probability of financial distress, and lower risk-adjusted stock returns during the crisis, as well as higher fines and settlements for subprime-related fraud.

published proceedings

  • JOURNAL OF FINANCIAL ECONOMICS

altmetric score

  • 33

author list (cited authors)

  • Kolasinski, A. C., & Yang, N.

citation count

  • 20

complete list of authors

  • Kolasinski, Adam C||Yang, Nan

publication date

  • January 2018