Managerial Attitudes and Corporate Actions

Abstract

We administer psychometric tests to senior executives to obtain evidence on their underlying psychological traits and attitudes. We find U.S. CEOs differ significantly from non-U.S. CEOs in terms of their underlying attitudes. In addition, we find that CEOs are significantly more optimistic and risk-tolerant than the lay population. We provide evidence that CEO’s behavioral traits such as optimism and managerial risk-aversion are related to corporate financial policies. Further, we provide new empirical evidence that CEO traits such as risk aversion and time preference are related to their compensation.

Keywords: Managers, attitudes, personality traits, risk aversion, capital structure, debt, acquisitions, corporate policies, behavioral corporate finance

JEL Classification: G30, G32, G34