Heroes or Villains? Culturally endorsed charismatic leadership style and stock price crash risk

Gaganis, Chrysovalantis and Leledakis, George N. and Pasiouras, Fotios and Pyrgiotakis, Emmanouil G. (2024): Heroes or Villains? Culturally endorsed charismatic leadership style and stock price crash risk.

Abstract

This study examines the association between the culturally endorsed charismatic leadership style in a society and stock price crash risk. The results reveal a positive and statistically significant association, providing support to the arguments about the dark-side view of charismatic leadership. This finding remains robust to the inclusion of various control variables, instrumental variable estimations that account for endogeneity, the use of sub-samples, and when considering the societal endorsement in the country of origin of the CEO rather than the country of the corporate headquarters. Further analysis reveals that the impact of the charismatic leadership style is channeled through two firm-level managerial actions, namely overinvestment and reporting opacity associated with accruals management. Finally, the results show that the impact of the culturally endorsed charismatic leadership style is moderated by the country-level minority investors’ protection rights and the strength of law and order.

• Item Type: MPRA Paper
• Language: English
• Keywords: Charismatic leadership style; stock price crash risk; CEO; culture
• Subjects: G - Financial Economics > G0 - General > G00 - General; G - Financial Economics > G1 - General Financial Markets > G12 - Asset Pricing ; Trading Volume ; Bond Interest Rates; G - Financial Economics > G1 - General Financial Markets > G14 - Information and Market Efficiency ; Event Studies ; Insider Trading; G - Financial Economics > G1 - General Financial Markets > G15 - International Financial Markets; M - Business Administration and Business Economics ; Marketing ; Accounting ; Personnel Economics > M1 - Business Administration > M12 - Personnel Management ; Executives; Executive Compensation

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