Through the eyes of the leader: CEO big five personality traits and financial reporting quality

Shiqiang Chen, Yun Liu, Huijuan Cao and Albert Tsang

Journal of Business Research, 2025, vol. 200, issue C

Abstract: This study examines how CEOs’ Big Five personality traits collectively shape financial reporting quality (FRQ). We argue that the five traits, though conceptually distinct, jointly reflect a CEO’s communicative openness, which facilitates high-quality financial information production and dissemination. Using a principal component derived from text-based estimates of CEO personality traits, we find that higher scores are associated with a lower likelihood of financial restatements. We validate this component’s construct relevance by linking it to teamwork-oriented language in corporate disclosures and elevated employee and stakeholder engagement. Cross-sectional tests show that the effect of CEO Big Five personality traits on FRQ is stronger in firms with greater organizational complexity and higher external uncertainty, where transparent communication is critical. When agency costs are high, however, CEOs may exploit their communicative personalities to obfuscate information, thereby reducing FRQ. Overall, these findings highlight the pivotal role CEO personality plays in shaping organizational behavior and FRQ.

Keywords: CEO big five personality; Upper echelons theory; Financial reporting quality; Firm complexity; Corporate uncertainty (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbrese:v:200:y:2025:i:c:s014829632500476x

DOI: 10.1016/j.jbusres.2025.115653

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