Does CEO extraversion pay off when in need? Evidence from the global financial crisis

Abstract

We examine the effect of CEO extraversion on corporate performance during the Global Financial Crisis (GFC). Contrary to the expectation that extraverted CEOs should shield firms better from GFC adversities, we document that the extraversion characteristic of CEOs places a significant, though negative, effect on corporate performance during the financial crisis. Our findings are robust to controlling for other CEO personality traits. We also perform a battery of robustness tests and validate the underperformance of firms with extraverted CEOs during the GFC using stock returns and measures of operating performance. We argue that because extraverted CEOs are associated with heightened firm risk profile, this can hurt firms when the market disciplines excessive risk-taking during the crisis.