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Psychopathic traits of corporate leadership as predictors of future stock returns

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  • Ayman M. A. Omar
  • Tomasz Piotr Wisniewski
  • Liafisu Sina Yekini

Abstract

This paper examines whether it is possible to forecast 1‐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.

Suggested Citation

  • Ayman M. A. Omar & Tomasz Piotr Wisniewski & Liafisu Sina Yekini, 2019. "Psychopathic traits of corporate leadership as predictors of future stock returns," European Financial Management, European Financial Management Association, vol. 25(5), pages 1196-1228, November.
    • Handle: RePEc:bla:eufman:v:25:y:2019:i:5:p:1196-1228
    DOI: 10.1111/eufm.12244
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    Cited by:

    1. Soral, Prakriti & Pati, Surya Prakash & Kakani, Ram Kumar, 2022. "Knowledge hiding as a coping response to the supervisors’ dark triad of personality: A protection motivation theory perspective," Journal of Business Research, Elsevier, vol. 142(C), pages 1077-1091.
    2. Matthias Pelster & Annette Hofmann & Nina Klocke & Sonja Warkulat, 2023. "Dark Triad Personality Traits and Selective Hedging," Journal of Business Ethics, Springer, vol. 182(1), pages 261-286, January.

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