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Albany, NY – In today's Academic Minute, Dr. Matthew Cain of the University of Notre Dame reveals how a thrill-seeking personality translates into the business world.
Matthew Cain is an assistant professor of finance in the Mendoza College of Business at the University of Notre Dame. His research interests focus on mergers and acquisitions, private equity, and financial contracting. Prior to entering the academy, he served as an analyst to private placements and loan syndications groups. He holds a Ph.D. in Finance from Purdue University.
Dr. Matthew Cain - Thrill-Seeking CEOs
Psychologists have long been interested in personality traits and the influence they have on individuals' behavior. More recently, interest has grown in behavioral profiling of corporate employees and executives. If we could identify personality traits that are better or worse for corporate leaders before hiring them, this could help firms avoid financial fraud or other disastrous outcomes. It could also help companies to become more successful by matching the right personality type with a given corporate strategy or need for change.
The psychological trait we focused on in this study is known as sensation seeking. This is a genetic trait that has been researched in hundreds of psychology studies. It's been shown to be correlated with all sorts of risky behaviors, from sky-diving and motorcycles to sex, drugs, and violent crimes.
We identified this particular trait based on studies that link sensation seekers to a desire to fly small airplanes. Based on Federal Aviation Administration data and public records searches, we tagged almost 200 CEO-pilots and several thousand CEO-non-pilots.
We found that sensation seekers, who tend to be bigger risk-takers in their personal lives, also take larger risks in their corporate decisions. These CEOs tend to use more debt in their firms. And they are also more likely to engage in mergers and acquisitions. Interestingly, these acquisitions tend to create significant value for their firms. So the firms, their employees, and ultimately shareholders, stand to benefit when companies in need of growth hire sensation seeking CEOs.
So the next time your firm is looking for new leadership and direction, don't be too quick to count out the candidate with the most speeding tickets he or she just might be the agent of change you're hoping for.