Article,
CEO personality traits, strategic flexibility, and firm dynamics
Contributors
Aabo T.
0000-0002-1035-7252
(Corresponding author)
[1]
[2]
Pantzalis C.
0000-0003-2230-8615
[3]
Park J.C.
0000-0003-0124-0295
[3]
Wulff J.N.
0000-0002-7976-0939
[2]
Affiliations
- [1] Danish Finance Institute [NORA names: Miscellaneous; Denmark; Europe, EU; Nordic; OECD];
- [2] Aarhus University [NORA names: AU Aarhus University; University; Denmark; Europe, EU; Nordic; OECD];
- [3] University of South Florida [NORA names: United States; America, North; OECD];
- [4] Durham University Business School [NORA names: United Kingdom; Europe, Non-EU; OECD];
- [5] University of Cyprus [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.
