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

Chrysovalantis Gaganis, George Leledakis, Fotios Pasiouras and Emmanouil G. Pyrgiotakis

MPRA Paper from University Library of Munich, Germany

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.

Keywords: Charismatic leadership style; stock price crash risk; CEO; culture (search for similar items in EconPapers)
JEL-codes: G00 G12 G14 G15 M12 (search for similar items in EconPapers)
Date: 2024-11
New Economics Papers: this item is included in nep-rmg
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