open access publication

Article, 2024

CEO personality traits, strategic flexibility, and firm dynamics

Journal of Corporate Finance, ISSN 0929-1199, 1872-6313, Volume 84, Page 102524, 10.1016/j.jcorpfin.2023.102524

Contributors

Aabo, Tom 0000-0002-1035-7252 (Corresponding author) [1] [2] Pantzalis, Christos 0000-0003-2230-8615 [3] Park, Jung Chul [3] Trigeorgis, Lenos G 0000-0001-7367-2674 [4] [5] Wulff, Jesper Nydam 0000-0002-7976-0939 [2]

Affiliations

  1. [1] Danish Finance Institute, Solbjerg Plads 3, 2000 Frederiksberg, Denmark
    2. [NORA names: Denmark; Europe, EU; Nordic; OECD];
  2. [2] Aarhus University
    3. [NORA names: AU Aarhus University; University; Denmark; Europe, EU; Nordic; OECD];
  3. [3] University of South Florida
    4. [NORA names: United States; America, North; OECD];
  4. [4] Durham University
    5. [NORA names: United Kingdom; Europe, Non-EU; OECD];
  5. [5] University of Cyprus
    6. [NORA names: Cyprus; Europe, EU]

Abstract

Reexamining CEO personality traits from a real options theory perspective, we suggest that the firm's strategic flexibility can be worsened by CEO conscientiousness and neuroticism. We use a measure of strategic flexibility as the firm's ability to take advantage of heightened volatility, which then results in superior stock returns. Our results suggest that strategic adaptability is impeded by rigid planning, resistance to change (conscientiousness) and lack of emotional stability (neuroticism). For firms that experience a decrease in volatility, the opposite holds. In line with trait activation theory, our results imply that the effect of specific CEO personality traits on firm dynamics and performance is contingent and context-specific. Our findings are economically significant and have important implications concerning CEO selection and management.

Keywords

CEO, CEO personality traits, CEO selection, ability, activity theory, adaptation, conscientiousness, context-specific, decrease, dynamics, effect, emotional stability, findings, firm dynamics, firm's ability, firm's strategic flexibility, firms, flexibility, heightened volatility, lack, management, measure of strategic flexibility, measurements, neuroticism, performance, personality traits, perspective, planning, resistance, return, rigid planning, selection, stability, stock returns, strategic adaptation, strategic flexibility, superior stock returns, theory, theory perspective, trait activation theory, traits, volatility

Data Provider: Digital Science

LINKS
-

Matching Records in NORA

SUBJECTS
+

METRICS
+