Cult of CEO Personality & Implications for Stock Prices

Cult of CEO Personality & Implications for Stock Prices

We at CEORater have highlighted the importance of CEO personality in terms of its influence on corporate strategy, operational and financial performance and thereby implications for stock prices. Don’t take our word for it, there’s plenty of published research from various academic institutions including the work of David Larker and Charles O’Reilly, both of Stanford GSB; Don Hambrick of Penn State and most recently the work of Harrison, Thurgood, Boivie and Pfarrer. CLICK HERE for an example of CEORater’s Personality Analysis of Tesla (tkr: TSLA), CEO Elon Musk.

Harrison, Thurgood, Boivie and Pfarrer’s (Collective Bio) work was recently featured in the Harvard Business Review article: “How A CEO’s Personality Affects Their Company’s Stock Price.” It’s an interesting article. Both CEORater and Harrison, Thurgood, Boivie and Pfarrer apply the Big 5 personality model.

Video interviews (we’ve included a few Musk interviews below) and transcripts provide sufficient information to assign personality type using Natural Language Processing (“NLP”) and Machine Learning models. We believe that advances in computer vision will enable real-time personality analytics for CEO keynote speeches and similar occasions.

Our view is that CEO/CXO personality typing will become a commonplace due diligence tool for investors – particularly for Quant investors who regularly leverage alternative data sets in their investment decision making process. Personality typing can be a powerful tool particularly when a new CEO is named and when a private company is marketing itself for an IPO. We also see a use case for M&A executives who may wish to include a personality analysis as part of their M&A due diligence process. Corporate Boards may also leverage CEO personality analytics to assist with CEO selection.