Solve the cause, not the symptom: Managerial myopia and environmental investment preferences

Corporate executives often favor short-term "end-of-pipe" solutions to comply with environmental regulations. In this study, we examine how managerial myopia influences corporate preferences for environmental investments, using data from listed Chinese firms between 2007 and 2021. Grounded in the upper-echelon and time orientation theories, this analysis reveals that managerial myopia discourages environmental investments, with a more pronounced impact on preventive measures compared to treatment-focused approaches. Mechanism tests indicate that managerial myopia impacts environmental investments by increasing financialization and reducing the quality of internal controls. Heterogeneity analysis further reveals specific contexts where managerial myopia is particularly inhibitory. Notably, preventative environmental investments can yield "innovation compensation" that ultimately improves financial performance. These findings may provide valuable insights for investors, analysts, board directors, and regulators seeking to understand and shape corporate strategies for environmental management.