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Economic situation, the key to understanding the links between CEOs' personal traits and the financial structure of large private companies

PloS one, 2019-07, Vol.14 (7), p.e0218853-e0218853 [Peer Reviewed Journal]

COPYRIGHT 2019 Public Library of Science ;COPYRIGHT 2019 Public Library of Science ;2019 Hernández-Pérez et al. This is an open access article distributed under the terms of the Creative Commons Attribution License: http://creativecommons.org/licenses/by/4.0/ (the “License”), which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. Notwithstanding the ProQuest Terms and Conditions, you may use this content in accordance with the terms of the License. ;2019 Hernández-Pérez et al 2019 Hernández-Pérez et al ;ISSN: 1932-6203 ;EISSN: 1932-6203 ;DOI: 10.1371/journal.pone.0218853 ;PMID: 31318877

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  • Title:
    Economic situation, the key to understanding the links between CEOs' personal traits and the financial structure of large private companies
  • Author: Hernández-Pérez, Jorge ; Cruz Rambaud, Salvador ; Lorenzana de la Varga, Tomás
  • Brañas-Garza, Pablo
  • Subjects: Attitude ; Attitudes ; Aversion ; Behavior ; Biology and Life Sciences ; Chief executive officers ; Commerce - trends ; Computer and Information Sciences ; Decision Making ; Decisions ; Demographic aspects ; Economics ; Face ; Financial leverage ; Humans ; Links ; Optimism ; Organizations ; People and Places ; Personality ; Personality traits ; Physical Sciences ; Quantitative psychology ; Recessions ; Research and Analysis Methods ; Risk aversion ; Social Sciences ; Spain ; Statistical analysis
  • Is Part Of: PloS one, 2019-07, Vol.14 (7), p.e0218853-e0218853
  • Description: Executives act based on their experiences, values, personality and personal interpretation of the situations which they face in their companies. Investigations in the field of Behavioral Corporate Finance have determined that there are some relations between CEOs' personal traits and financial decisions of large companies, but these results are based on indirect personal trait measurements and on public companies. To see whether such relations also exist between CEOs' personal traits and the financial structure of large private companies, we used psychometric tests to measure their level of optimism, risk attitude and affect heuristic, collected financial data for a period of fourteen years, and considered the economic situation of the country as a key factor in these relations. This paper reports the relationship of executives' personal traits with the financial structure of large Spanish companies for the period 2001-2014. We observed that executives' high optimism (and risk aversion attitude) is positively (negatively) related to long-term debt, whilst positive affect is directly associated to the financial leverage and short-term debt. This paper also reports a change of relations when taking into account the country's economic situation. In effect, by considering this new variable, executives' risk aversion is seen to be associated to financial leverage and short-term debt, whilst CEOs' positive affect is linked to long-term debt. These relations are strongly moderated and they become statistically significant in a contracting economic period. In conclusion, the links between CEOs' personal traits and financial structure of large private Spanish companies make sense when the effect of the economic situation is taken into account. Furthermore, the awareness of these links helps to understand the financial decisions taken within large Spanish companies.
  • Publisher: United States: Public Library of Science
  • Language: English
  • Identifier: ISSN: 1932-6203
    EISSN: 1932-6203
    DOI: 10.1371/journal.pone.0218853
    PMID: 31318877
  • Source: Public Library of Science (PLoS) Journals Open Access
    AUTh Library subscriptions: ProQuest Central
    GFMER Free Medical Journals
    MEDLINE
    PubMed Central
    DOAJ Directory of Open Access Journals
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