Investigate the effect of ROA in companies listed on Tehran Stock Exchange

Document Type : Original Article

Authors

1 Associate Prof. Of Financial Management ، Faculty of Management and Accounting ، Shahid Beheshti University

2 Master of Financial Management. Of Financial Management ، Faculty of Management and Accounting ، Shahid Beheshti University

Abstract

Myopia is a form of bias or tendency that creates a serious and important limitation for considering options and recommendations on the selection and decision-making. Myopia, in fact, means the overestimation of short-term benefits and underestimation of long-term benefits by active investors in the market. In markets free from the efficiency features, investors and decision makers determine the value of firms according to what occurred in the past and might happen in near future and do not consider the potential abilities of the firm in a more distant future. Considering the importance of myopia, this article aimed to study the effect of managerial myopia on future stock returns of companies listed on TSE. In this article, companies with managerial myopia were selected where marketing and R&D expenses declined by the positive financial performance and ROA increase. In general, using a sample which consisted of companies listed on TSE from 2006 to 2014 we observed decreasing future annual returns of stocks. In other words, it had no effect on the relationship between the abnormal returns and managerial myopia. In case of managerial myopia, the result was not statistically significant, however.

Keywords

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