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Too Negative to Take Risks? The Effect of the CEO's Emotional Traits on Firm Risk
Author(s) -
DelgadoGarcía Juan Bautista,
De La FuenteSabaté Juan Manuel,
De QuevedoPuente Esther
Publication year - 2010
Publication title -
british journal of management
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 2.407
H-Index - 108
eISSN - 1467-8551
pISSN - 1045-3172
DOI - 10.1111/j.1467-8551.2008.00625.x
Subject(s) - affect (linguistics) , neglect , loan , sample (material) , upper echelons , psychology , credit risk , business , social psychology , marketing , strategic management , actuarial science , finance , chemistry , communication , chromatography , psychiatry
Except for some recent survey and experimental studies, strategic management research has tended to neglect the influence of emotions on managers' strategic choices. This paper analyses the influence of the stable, long‐term emotional traits of CEOs on an actual business outcome: risk taking. The hypotheses are tested on a sample of 51 Spanish banks and savings banks. Our results show that CEO affective traits influence banks' risk taking. Specifically, our analyses show that managers' negative affective traits are related to lower risk taking as reflected in a lower variability in performance, a lower level of credit risk and a less risky composition of the loan portfolios of the banks they manage. Positive affective traits do not seem to influence the level of risk. These findings partially support ‘affect congruency and generalization’ arguments, and show the need to consider the role of affects when analysing CEOs' strategic choices.