Extroverted CEOs can be bad for business

Extroversion is traditionally seen as a positive leadership trait; however, new research links more extroverted CEOs to lower company financial performance.

The study, published by SSRN and featured by Alina Dizik in The Wall Street Journal, scored CEOs on extroversion based on the language they used in the unscripted portion of quarterly earnings calls. The researchers analyzed scripts from 76,815 calls over nine years from S&P 1,500 companies. This extroversion score was compared to the company's cost of equity capital, which is a common benchmark for financial health. 

The researchers found the most extroverted CEOs were associated with lower valuation than the companies with the least extroverted CEOs. Extroversion was associated with taking risk, which drives up the cost of equity capital.

"Our findings suggest that in CEO hiring decisions, boards should weigh the benefits of CEO 'charisma' against the potential costs," the authors conclude.


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