Psychopathic traits of corporate leadership as predictors of future stock returns

Journal article


Wisniewski, Tomasz Piotr, Yekini, Liafisu Sina and Omar, Ayman 2019. Psychopathic traits of corporate leadership as predictors of future stock returns. European Financial Management. https://doi.org/10.2139/ssrn.2984999
AuthorsWisniewski, Tomasz Piotr, Yekini, Liafisu Sina and Omar, Ayman
Abstract

This paper examines whether it is possible to forecast one-year-ahead returns of individual companies based on the observed ‘psychopathic’ characteristics of their top management team. We find that language characteristic of psychopaths present in annual report narratives, questionable integrity, excessive risk-taking and failure to contribute to charitable undertakings tend to reduce future shareholder wealth. These findings imply that firms could benefit from incorporating psychological evaluation in their recruitment processes, especially when seeking to fill senior management posts. While the return predictability described in this paper supports the upper echelons perspective, it simultaneously challenges the notion of informationally efficient stock prices.

Keywordscorporate psychopaths; stock market returns; shareholders wealth; behavioural finance
Year2019
JournalEuropean Financial Management
SSRN Electronic Journal
PublisherWiley
ISSN13547798
1468036X
Digital Object Identifier (DOI)https://doi.org/10.2139/ssrn.2984999
Web address (URL)http://hdl.handle.net/10545/624224
hdl:10545/624224
Publication dates07 Oct 2019
Publication process dates
Deposited23 Oct 2019, 08:06
Accepted29 Oct 2018
ContributorsCoventry University
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