The Effect of CEO Extraversion on Analyst Forecasts: Stereotypes and Similarity Bias

Jochen Becker; Josip Medjedovic; Christoph Merkle

doi:10.1111/fire.12173

The Effect of CEO Extraversion on Analyst Forecasts: Stereotypes and Similarity Bias

Jochen Becker, Josip Medjedovic, Christoph Merkle^*

^*Corresponding author for this work

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

15 Citations (Scopus)

Abstract

In an experiment with professional analysts, we study their reliance on CEO personality information when producing financial forecasts. Drawing on social cognition research, we suggest analysts apply a stereotyping heuristic, believing that extraverted CEOs are more successful. The between-subjects results with CEO extraversion as treatment variable confirm that analysts issue more favorable forecasts (earnings per share, long-term earnings growth, and target price) for firms led by extraverted CEOs. Increased forecast uncertainty leads to even stronger stereotyping. Additionally, personality similarity between analysts and CEOs has a large effect on financial forecasts. Analysts issue more positive forecasts for CEOs similar to themselves.

Original language	English
Journal	Financial Review
Volume	54
Issue	1
Pages (from-to)	133-164
Number of pages	32
ISSN	0732-8516
DOIs	https://doi.org/10.1111/fire.12173
Publication status	Published - Feb 2019
Externally published	Yes

Keywords

CEO personality
extraversion
financial analyst
G02
G24
M12
nonfinancial information
similarity bias
stereotyping heuristic

Access to Document

10.1111/fire.12173

Cite this

@article{5591cd7f4d844f8ea7886faf99874b0c,

title = "The Effect of CEO Extraversion on Analyst Forecasts: Stereotypes and Similarity Bias",

abstract = "In an experiment with professional analysts, we study their reliance on CEO personality information when producing financial forecasts. Drawing on social cognition research, we suggest analysts apply a stereotyping heuristic, believing that extraverted CEOs are more successful. The between-subjects results with CEO extraversion as treatment variable confirm that analysts issue more favorable forecasts (earnings per share, long-term earnings growth, and target price) for firms led by extraverted CEOs. Increased forecast uncertainty leads to even stronger stereotyping. Additionally, personality similarity between analysts and CEOs has a large effect on financial forecasts. Analysts issue more positive forecasts for CEOs similar to themselves.",

keywords = "CEO personality, extraversion, financial analyst, G02, G24, M12, nonfinancial information, similarity bias, stereotyping heuristic",

author = "Jochen Becker and Josip Medjedovic and Christoph Merkle",

year = "2019",

month = feb,

doi = "10.1111/fire.12173",

language = "English",

volume = "54",

pages = "133--164",

journal = "Financial Review",

issn = "0732-8516",

publisher = "Wiley-Blackwell",

number = "1",

}

TY - JOUR

T1 - The Effect of CEO Extraversion on Analyst Forecasts

T2 - Stereotypes and Similarity Bias

AU - Becker, Jochen

AU - Medjedovic, Josip

AU - Merkle, Christoph

PY - 2019/2

Y1 - 2019/2

N2 - In an experiment with professional analysts, we study their reliance on CEO personality information when producing financial forecasts. Drawing on social cognition research, we suggest analysts apply a stereotyping heuristic, believing that extraverted CEOs are more successful. The between-subjects results with CEO extraversion as treatment variable confirm that analysts issue more favorable forecasts (earnings per share, long-term earnings growth, and target price) for firms led by extraverted CEOs. Increased forecast uncertainty leads to even stronger stereotyping. Additionally, personality similarity between analysts and CEOs has a large effect on financial forecasts. Analysts issue more positive forecasts for CEOs similar to themselves.

AB - In an experiment with professional analysts, we study their reliance on CEO personality information when producing financial forecasts. Drawing on social cognition research, we suggest analysts apply a stereotyping heuristic, believing that extraverted CEOs are more successful. The between-subjects results with CEO extraversion as treatment variable confirm that analysts issue more favorable forecasts (earnings per share, long-term earnings growth, and target price) for firms led by extraverted CEOs. Increased forecast uncertainty leads to even stronger stereotyping. Additionally, personality similarity between analysts and CEOs has a large effect on financial forecasts. Analysts issue more positive forecasts for CEOs similar to themselves.

KW - CEO personality

KW - extraversion

KW - financial analyst

KW - G02

KW - G24

KW - M12

KW - nonfinancial information

KW - similarity bias

KW - stereotyping heuristic

UR - http://www.scopus.com/inward/record.url?scp=85059526733&partnerID=8YFLogxK

U2 - 10.1111/fire.12173

DO - 10.1111/fire.12173

M3 - Journal article

AN - SCOPUS:85059526733

SN - 0732-8516

VL - 54

SP - 133

EP - 164

JO - Financial Review

JF - Financial Review

IS - 1

ER -

The Effect of CEO Extraversion on Analyst Forecasts: Stereotypes and Similarity Bias

Abstract

Keywords

Access to Document

Other files and links

Fingerprint

Cite this