CEO personality traits, strategic flexibility, and firm dynamics

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,...

Full description

Saved in:
Bibliographic Details
Published inJournal of corporate finance (Amsterdam, Netherlands) Vol. 84; p. 102524
Main Authors Aabo, Tom, Pantzalis, Christos, Park, Jung Chul, Trigeorgis, Lenos, Wulff, Jesper N.
Format Journal Article
LanguageEnglish
Published Elsevier B.V 01.02.2024
Subjects
CEO personality traits
Corporate performance
Managerial ability
Real options
Strategic flexibility
G41
G30
G34
Strategic flexibility
Corporate performance
Real options
CEO personality traits
Managerial ability
Online AccessGet full text

Cover

More Information
Summary: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.
ISSN:0929-1199
1872-6313
DOI:10.1016/j.jcorpfin.2023.102524