Market signaling capacity of written and visual charismatic leadership tactics

Abstract

We investigate the market signaling capacity of Chief Executive Officer (CEO) charismatic rhetoric. We rely on signaling theory and embodiment theory of charismatic leadership to develop and test the hypothesis that written and visual charismatic signals have a positive influence on investor signal participation. Evaluating CEO letters of S&P100-listed firms from 2012–2015, we find evidence of the presence and interactive effects of both written and visual charismatic market signals. We also find that written or visual charismatic tactics, when assessed independently, have a counterproductive (negative) influence on investor signal participation. Additionally, CEO compensation acts to amplify the market signaling capacity of the combination of written and visual charismatic signals. This research contributes new insight to the literature on the potential downside to CEO charisma, and thereby provides guidance to those curating CEO messages to external stakeholders.