Top executives' emotional stability and firm risk-taking: A machine learning-based study

Jintong Guo, Rui Ding, Ziyi Zhang and Min Zhang

Pacific-Basin Finance Journal, 2025, vol. 90, issue C

Abstract: This study shows that executive personality traits play an important role in firm risk-taking. We introduce a novel videometric measure of executives' emotional stability using a video-based machine learning method. We validate this by providing evidence consistent with the neuroscience literature that older and male executives are more emotionally stable. We find that emotionally stable executives are more receptive to risk-taking. This effect is primarily driven by the emotional regulation towards negative moods. The positive relation between emotional stability and corporate risk-taking is prominent when executives face greater capital market pressure. Firms led by emotionally stable executives have fewer cash holdings, greater leverage, and higher investment expenditure. In addition, we find that executives' emotional stability increases firm financial performance. Overall, this study sheds light on executive personality antecedents of firm-level outcomes, and provides insights into measuring emotional stability in large-scale studies.

Keywords: Emotional stability; Risk-taking; Machine learning; Video methods; Upper echelons theory (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:pacfin:v:90:y:2025:i:c:s0927538x25000162

DOI: 10.1016/j.pacfin.2025.102679

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