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Psychopathic Traits of Corporate Leadership as Predictors of Future Stock Returns

Omar, Ayman M.A.; Wisniewski, Tomasz Piotr and Yekini, Liafisu Sina (2019). Psychopathic Traits of Corporate Leadership as Predictors of Future Stock Returns. European Financial Management, 25(5) pp. 1196–1228.

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DOI (Digital Object Identifier) Link: https://doi.org/10.1111/eufm.12244
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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.

Item Type: Journal Item
Copyright Holders: 2019 John Wiley & Sons
ISSN: 1354-7798
Keywords: Corporate Psychopaths; Stock Market Returns; Shareholders’ Wealth; Behavioral Finance
Academic Unit/School: Faculty of Business and Law (FBL) > Business > Department for Accounting and Finance
Faculty of Business and Law (FBL) > Business
Faculty of Business and Law (FBL)
Item ID: 57126
Depositing User: Tomasz Wisniewski
Date Deposited: 16 Oct 2018 14:44
Last Modified: 15 Nov 2019 14:05
URI: http://oro.open.ac.uk/id/eprint/57126
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