Citation: Rostami, Vahab, Hamed Kargar, and Mahdis Samimifard. 2022. The Effect of Managerial Myopia on the Adjustment Speed of the Company’s Financial Leverage towards the Optimal Leverage. Journal of Risk and Financial Management 15: 581. https:// doi.org/10.3390/jrfm15120581 Academic Editor: Thanasis Stengos Received: 18 October 2022 Accepted: 2 December 2022 Published: 6 December 2022 Publisher’s Note: MDPI stays neutral with regard to jurisdictional claims in published maps and institutional affil- iations. Copyright: © 2022 by the authors. Licensee MDPI, Basel, Switzerland. This article is an open access article distributed under the terms and conditions of the Creative Commons Attribution (CC BY) license (https:// creativecommons.org/licenses/by/ 4.0/). Journal of Risk and Financial Management Article The Effect of Managerial Myopia on the Adjustment Speed of the Company’s Financial Leverage towards the Optimal Leverage Vahab Rostami 1, *, Hamed Kargar 1 and Mahdis Samimifard 2 1 Department of Economics and Administrative Sciences, Payame Noor University, Tehran 19395-4697, Iran 2 Department of Accounting, Zanjan University, Zanjan 45371-38791, Iran * Correspondence: vahab.rostami@pnu.ac.ir Abstract: The adjustment speed of financial leverage indicates the movement of companies towards the optimal capital structure, and clearly shows the financing policies of companies. The importance of optimal leverage is such that the growth and survival of companies depend on this factor. This study investigates the effect of managers’ myopia on the adjustment speed of financial leverage toward optimal leverage. The current research is applied, and from the methodological point of view, the correlation is a causal type (retrospective). The statistical population of the research includes all the companies admitted to the Tehran Stock Exchange between 2011 and 2020, and using the systematic elimination sampling method, 124 companies were selected as the research sample. The research results showed that the myopia of managers has an opposite effect on the adjustment speed of financial leverage, so in companies with myopic managers, the adjustment speed of financial leverage decreases towards optimal leverage. Keywords: adjustment speed of financial leverage; optimal leverage; managerial myopia 1. Introduction In today’s world, organizations and business enterprises operate in an environment of competition in the capital market, and the manager is considered to be the heart of every organization. Despite a company’s facilities, technology, and optimal workforce, a poorly performing manager will result in the company’s failure to achieve its goals (Salehi et al. 2022). Choosing efficient managers is one of the most critical concerns of companies nowadays. In this regard, it can be seen that the behavior of managers caused by their personality traits will affect the performance of companies (Daliri et al. 2020). Chief executive officers (CEOs) play a vital role in the company’s strategic decision-making. Over the past decades, the responsibilities of CEOs have increased significantly. CEOs today must participate in the company’s decision-making process, especially in financial matters. In certain companies the CEO is required to make financial decisions. At the same time, certain other financial decisions of companies result from the satisfaction of senior managers. Managers may not always choose debt options that maximize shareholder value, but prefer to limit the use of debt for their own interests (Zimon et al. 2022). This conflict creates additional agency costs and ultimately leads to the company’s poor performance (Zahedi et al. 2022). CEOs often protect their interests when making financial decisions about companies (Naseem et al. 2019; Seifzadeh et al. 2022; Salehi and Zimon 2021). According to previous studies on people’s personality traits, the results show that people’s behavior largely depends on their personality traits, and one of these influencing factors is the phenomenon of myopia among managers (Almaleki et al. 2021). The capital market and the performance of companies in this market are influenced by a variety of factors (Kieschnick and Moussawi 2018). One of the critical influential factors is the decisions of company managers, who are the final decision-makers in executive matters. Managerial myopia is one such critical factor that can significantly impact the decisions of investors and managers, J. Risk Financial Manag. 2022, 15, 581. https://doi.org/10.3390/jrfm15120581 https://www.mdpi.com/journal/jrfm