Collective personality of top listed firms in Australia and its impact on financial and market performance

Abstract

This paper examines three research problems. First, what collective personality traits are reflected in CEOs’ statements in firms’ annual reports? Second, is there any impact of collective personality on financial (ROE – return on equity) and market (TQ – Tobin’s Q) performance? Third, whether attributes of CEOs or collective personality makes a greater impact on firm performance? Using the machine learning approach employed by IBM’s Personality Insights service, we performed a content analysis of 804 CEO’s annual report statements in 402 firms to estimate collective personality scores and adopted hierarchical multiple regression analysis to examine the intended relationships. The study found that collective conscientiousness and agreeableness impact positively on ROE and TQ and collective openness and neuroticism impact negatively on either or both ROE and TQ. Further, the collective personality tends to show a greater impact on ROE and firm size by assets than the impact of CEOs attributes. Besides exploring a relatively less-researched concept, the study highlights the practical value of developing intellectual and human capital through governance practices and leadership towards enhancing firm performance.