CEO personality traits, strategic flexibility, and firm dynamics

Tom Aabo; Christos Pantzalis; Jung Chul Park; Lenos Trigeorgis; Jesper Wulff

doi:10.1016/j.jcorpfin.2023.102524

CEO personality traits, strategic flexibility, and firm dynamics

Tom Aabo^*, Christos Pantzalis, Jung Chul Park, Lenos Trigeorgis, Jesper Wulff

^*Corresponding author for this work

Department of Economics and Business Economics

Research output: Contribution to journal/Conference contribution in journal/Contribution to newspaper › Journal article › Research › peer-review

17 Citations (Scopus)

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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.

Original language	English
Article number	102524
Journal	Journal of Corporate Finance
Volume	84
ISSN	0929-1199
DOIs	https://doi.org/10.1016/j.jcorpfin.2023.102524
Publication status	Published - 2024

Keywords

CEO personality traits
Corporate performance
Managerial ability
Real options
Strategic flexibility

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10.1016/j.jcorpfin.2023.102524Licence: CC BY

1-s2.0-S0929119923001736-mainFinal published version, 1.82 MBLicence: CC BY

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title = "CEO personality traits, strategic flexibility, and firm dynamics",

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 personality traits, Corporate performance, Managerial ability, Real options, Strategic flexibility",

author = "Tom Aabo and Christos Pantzalis and Park, {Jung Chul} and Lenos Trigeorgis and Jesper Wulff",

year = "2024",

doi = "10.1016/j.jcorpfin.2023.102524",

language = "English",

volume = "84",

journal = "Journal of Corporate Finance",

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T1 - CEO personality traits, strategic flexibility, and firm dynamics

AU - Aabo, Tom

AU - Pantzalis, Christos

AU - Park, Jung Chul

AU - Trigeorgis, Lenos

AU - Wulff, Jesper

PY - 2024

Y1 - 2024

N2 - 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.

AB - 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.

KW - CEO personality traits

KW - Corporate performance

KW - Managerial ability

KW - Real options

KW - Strategic flexibility

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U2 - 10.1016/j.jcorpfin.2023.102524

DO - 10.1016/j.jcorpfin.2023.102524

M3 - Journal article

SN - 0929-1199

VL - 84

JO - Journal of Corporate Finance

JF - Journal of Corporate Finance

M1 - 102524

ER -

CEO personality traits, strategic flexibility, and firm dynamics

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Keywords

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