Document Type
Article
Publication Date
2-5-2024
Abstract
We examine whether CEO extraversion, an important personality trait associated with leadership, is associated with firms' expected cost of equity capital. We measure CEO extraversion using CEOs' speech patterns during the unscripted portion of conference calls. After controlling for multiple CEO and firm-specific variables, we find a strong positive incremental association between CEO extraversion and firms' expected cost of capital. Moreover, cost of equity increases when a more extraverted CEO replaces a less extraverted CEO. In addition, we find that firms with relatively extraverted CEOs take more risk and exhibit lower credit ratings, which is associated with higher cost of equity capital. These results are statistically and economically meaningful and do not appear to be driven by reverse causality, endogenous matching, look-ahead bias, or bias in analysts' earnings forecast.
Recommended Citation
Adebambo, B., Bowen, R. M., Malhotra, S., & Zhu, P. (2024). CEO extraversion and the cost of equity capital. Journal of Financial Research, 1–40. https://doi.org/10.1111/jfir.12389
Peer Reviewed
1
Copyright
The authors
Creative Commons License
This work is licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 4.0 License.
Comments
This article was originally published in Journal of Financial Research in 2024. https://doi.org/10.1111/jfir.12389