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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; 14(7):e0218853Plos

Abstract

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.

Authors+Show Affiliations

Department of Quantitative Methods, University of Loyola Andalucía, Sevilla, Spain.Department of Economics and Business, University of Almería, Almería, Spain.Department of Economics and Business, University of Almería, Almería, Spain.

Pub Type(s)

Journal Article

Language

eng

PubMed ID

31318877

Citation

Hernández-Pérez, Jorge, et al. "Economic Situation, the Key to Understanding the Links Between CEOs' Personal Traits and the Financial Structure of Large Private Companies." PloS One, vol. 14, no. 7, 2019, pp. e0218853.
Hernández-Pérez J, Cruz Rambaud S, Lorenzana de la Varga T. Economic situation, the key to understanding the links between CEOs' personal traits and the financial structure of large private companies. PLoS ONE. 2019;14(7):e0218853.
Hernández-Pérez, J., Cruz Rambaud, S., & Lorenzana de la Varga, T. (2019). Economic situation, the key to understanding the links between CEOs' personal traits and the financial structure of large private companies. PloS One, 14(7), pp. e0218853. doi:10.1371/journal.pone.0218853.
Hernández-Pérez J, Cruz Rambaud S, Lorenzana de la Varga T. Economic Situation, the Key to Understanding the Links Between CEOs' Personal Traits and the Financial Structure of Large Private Companies. PLoS ONE. 2019;14(7):e0218853. PubMed PMID: 31318877.
* Article titles in AMA citation format should be in sentence-case
TY - JOUR T1 - Economic situation, the key to understanding the links between CEOs' personal traits and the financial structure of large private companies. AU - Hernández-Pérez,Jorge, AU - Cruz Rambaud,Salvador, AU - Lorenzana de la Varga,Tomás, Y1 - 2019/07/18/ PY - 2018/01/29/received PY - 2019/05/23/accepted PY - 2019/7/19/entrez PY - 2019/7/19/pubmed PY - 2019/7/19/medline SP - e0218853 EP - e0218853 JF - PloS one JO - PLoS ONE VL - 14 IS - 7 N2 - 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. SN - 1932-6203 UR - https://www.unboundmedicine.com/medline/citation/31318877/Economic_situation,_the_key_to_understanding_the_links_between_CEOs'_personal_traits_and_the_financial_structure_of_large_private_companies L2 - http://dx.plos.org/10.1371/journal.pone.0218853 DB - PRIME DP - Unbound Medicine ER -