Managerial traits and investment efficiency: The role of long-term orientation and perceived trustworthiness


While firm-level and country-level factors have received ample attention in explaining corporate investment decisions, individual managerial characteristics have only experienced limited recognition in this field. However, a large body of literature suggests that corporate financial decision-making exhibits a substantial manager fixed effect. Our project thus aims at explaining the role of managerial characteristics, especially time preferences and managers‘ trustworthiness as perceived by investors, in explaining corporate investment decision.

Among others, our research attempts to answer several important questions:

  1. Do managerial time preferences and perceived trustworthiness influence corporate investment efficiency?
  2. Can certain governance structures curtail managerial traits that lead to sub-optimal investment decisions?
  3. Are managerial time preferences and perceived trustworthiness complements in fostering investment efficiency?

Methodologically, we employ numerous approaches to determine managerial traits. Among other things, we derive measures on managerial traits from textual sentiment on public disclosure documents. For this purpose, we have established a rich database on 10-K filings, analyst calls and further documents that convey managerial language. We also use CEOs’ cultural background or other observable characteristics that have been linked to individual time preferences or perceived trustworthiness by the psychology literature.

The project is funded by the Deutsche Forschungsgemeinschaft.



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