Top-Down Influence? Predicting CEO Personality and Risk Impact from Speech Transcripts

TL;DR

This paper develops a text-based model to predict CEO personality traits from speech transcripts using crowd-sourced MBTI assessments, demonstrating that these predicted traits can explain variations in company financial risk, thus empirically supporting management theory.

Contribution

It introduces a novel method for estimating CEO personality from speech transcripts using crowd-sourced MBTI data, linking personality traits to financial risk outcomes.

Findings

Predicted CEO personality traits correlate moderately to strongly with MBTI assessments.

CEO personality predictions can explain variations in company financial risk.

The approach supports the upper echelons theory with empirical evidence.

Abstract

How much does a CEO's personality impact the performance of their company? Management theory posits a great influence, but it is difficult to show empirically -- there is a lack of publicly available self-reported personality data of top managers. Instead, we propose a text-based personality regressor using crowd-sourced Myers--Briggs Type Indicator (MBTI) assessments. The ratings have a high internal and external validity and can be predicted with moderate to strong correlations for three out of four dimensions. Providing evidence for the upper echelons theory, we demonstrate that the predicted CEO personalities have explanatory power of financial risk.