One step forward, two steps back: how negative external evaluations can shorten organizational time horizons

Mark DesJardine, Pratima Bansal

Research output: Contribution to journalArticleResearchpeer-review

1 Citation (Scopus)

Abstract

Researchers have endeavored to explain the causes of short organizational time horizons because of the organizational and societal costs of corporate short-termism. These explanations, however, tend to confound cognitive with behavioral explanations, which masks the importance of cognitive biases. We address this oversight by situating our work in prospect theory and organizational search, which underscores the importance of external evaluations on organizational time horizons and the asymmetry of positive and negative evaluations. Specifically, we argue that negative evaluations will shorten organizational time horizons more than positive evaluations will lengthen them. In our research context of financial analysts, this means that “sell” recommendations will shorten time horizons more than “buy” recommendations will lengthen them. Our main thesis can help to explain rising short-termism among some publicly traded companies. We operationalize organizational time horizons by the language managers use during 3,136 quarterly earnings conference calls. We test our main hypothesis and other timing-related moderating effects on 98 extractives firms from 2006 to 2013.

Original languageEnglish
Pages (from-to)761-780
Number of pages20
JournalOrganization Science
Volume30
Issue number4
DOIs
Publication statusPublished - Jul 2019
Externally publishedYes

Keywords

  • External evaluations
  • Organizational search
  • Organizational time horizon
  • Security analysts
  • Short-termism
  • Textual analysis

Cite this

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abstract = "Researchers have endeavored to explain the causes of short organizational time horizons because of the organizational and societal costs of corporate short-termism. These explanations, however, tend to confound cognitive with behavioral explanations, which masks the importance of cognitive biases. We address this oversight by situating our work in prospect theory and organizational search, which underscores the importance of external evaluations on organizational time horizons and the asymmetry of positive and negative evaluations. Specifically, we argue that negative evaluations will shorten organizational time horizons more than positive evaluations will lengthen them. In our research context of financial analysts, this means that “sell” recommendations will shorten time horizons more than “buy” recommendations will lengthen them. Our main thesis can help to explain rising short-termism among some publicly traded companies. We operationalize organizational time horizons by the language managers use during 3,136 quarterly earnings conference calls. We test our main hypothesis and other timing-related moderating effects on 98 extractives firms from 2006 to 2013.",
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One step forward, two steps back : how negative external evaluations can shorten organizational time horizons. / DesJardine, Mark; Bansal, Pratima.

In: Organization Science, Vol. 30, No. 4, 07.2019, p. 761-780.

Research output: Contribution to journalArticleResearchpeer-review

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T2 - how negative external evaluations can shorten organizational time horizons

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