Abstract
Distinctive from prior research that emphasizes the influences of CEO demographic characteristics on corporate financial strategies, this study uses constellation as the proxy variables for CEO psychological traits and takes into consideration demographic characteristic variables to further analyze the relationship between CEO traits and corporate financial leverage, performance, and growth opportunity. This is an interesting issue worthy of study because shareholders and potential investors are always searching for CEOs that can create and increase values for the firms. The results show that there is a greater proportion of Leo CEOs in high-leverage firms, a greater proportion of Virgo CEOs in low-leverage and high-ROA firms, and a greater proportion of Pisces CEOs in both low- and high-MB-ratio firms. In addition, the CEOs with air-constellation are positively related to ROA. In general, fire-sign and earth-sign CEOs prefer high financial leverage, while air-sign CEOs are averse to such; fire-sign and air-sign CEOs have positive influences on firm profitability, while earth-sign CEOs have negative influences. Moreover, cash compensation will reduce the positive effect of air-sign CEOs on ROA.
Highlights
The chief executive officer (CEO) is the primary decision-maker in a company and is an important leader in planning the company’s strategic directions (Calori, Johnson, & Sarnin, 1994; Certo, Lester, Dalton, & Dalton, 2006)
The results show that the average debt ratio of the 129 firms is 60.09%; the average ROA is 5.96%; the average MB ratio is 3.02; the average total assets is USD 47,219 million; the average CEO age is 70; the average cash pay for the CEO is USD 2,112,000
From the perspective of financial behaviors, corporate financing decisions are significantly influenced by CEO demographic characteristics and psychological traits
Summary
The chief executive officer (CEO) is the primary decision-maker in a company and is an important leader in planning the company’s strategic directions (Calori, Johnson, & Sarnin, 1994; Certo, Lester, Dalton, & Dalton, 2006). A CEO’s management style affects the formation and execution of the firm’s strategies (Jensen & Zajac, 2004), and his/her managerial characteristics affect the firm’s investment decisions, financial performance and firm value (Malmendier & Tate, 2005; Coel & Thakor, 2008; Colbert, Barrick, & Bradely, 2014). Peterson, Martorana, Smith, and Owens (2003) and Kisfalvi and Pitcher (2003) discussed how the CEO’s personality influences the decision-making process of the top management teams (TMTs) and the subsequent impact on firm performance. The psychological biases or personality traits of the manager are important factors influencing the differences in the firm’s decisions (Baccar, Ben Mohamed, & Bouri, 2013; Ben Fatma, Ben Mohamed, & Boudabouss, 2013; Graham, Harvey, & Puri, 2013; Ben Mohamed, Souisssi, Baccar, & Bouri, 2014). Several scholars have pointed out that the CEO’s managerial orientation has significant impact on the diversification strategy of the corporation (Papadakis, 2006; Martinez-Campillo & Fernandez-Gago, 2011)
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