Managerial Myopia and Product Market Reputation: Evidence from Amazon.com Reviews

Abstract

Using a novel dataset of customer reviews from Amazon.com, I study the impact of managerial myopia on product market reputation. Using exogenous variation due to the timing of CEO equity vesting events, I show that short-term incentive shocks predict declines in reputation. A changing product market lineup and a deterioration of existing products are two mechanisms through which reputation is affected. The effect is larger when the CEO has other short-term concerns and when the firm has a low reputation in the product market. However, higher advertising expenses mitigate the negative reputational effect among consumers. Using an alternative empirical methodology, I find that higher short-term ownership in the firm is also associated with declining product market reputation, while higher long-term ownership is associated with increasing reputation.

Keywords: Myopia, Product markets, Investment, Reputation

JEL Classification: D22, G30, L14, M12