HOW DO CEO EMOTIONS MATTER? IMPACT OF CEOAFFECTIVE TRAITS ON STRATEGIC AND

PERFORMANCE CONFORMITY IN THE SPANISHBANKING INDUSTRY

North South University1- March -2012

Presentation on Strategic Management Journal

But largely ignored the role of emotions in shaping

managers’ strategic choices.

There are huge number of researches on How

managers influence firm outcomes & explanations

of differences in organizational strategies & performance within a

given industry

Background

This journal for to analyzes the influence of the affective traits of

CEOs & their long-term tendency to

experience positive or negative moods or emotions

on strategy and performance conformity in a sample of Spanish banks and savings banks.

Objective of the Journal

More conformis

t strategies

More typical

performance

Outcomes

Result Shows that :•Managers’ negative affective traits are related to

Promote outcomes that deviate from the

central tendencies of the industry.

Outcomes

whereas positive affective traits seem to

CEO negative affective traits

Typical performan

ce.

Outcome

Strategic conformity mediates

The relationship between

How does affects influence thinking

1.A : Positive affective traits of CEOs will be

negatively related to firm strategic conformity

1.B. Negative affective traits of CEO will be

positively related to firm strategic conformity

2.A. Positive Affective traits of CEO’s will be

negatively related to typical performance by the firm

2.B. Negative affective traits of CEOs will be

positively related to typical performance.

3.A Strategic conformity mediates the negative relationship between the positive affective

traits of CEOs and typical performance by the firm

3. B Strategic conformity mediates the positive relationship between the negative affective

traits of CEO’s and typical performance by the firm

Research Hypothesis

1.A : Positive affective

traits of CEOs will be negatively related to

firm strategic conformity

1.B. Negative affective

traits of CEO will be positively related to

firm strategic conformity

Hypothesis

2.APositive Affective traits of CEO’s will

be negatively related to typical

performance by the firm

2.BNegative affective

traits of CEOs will be positively related to typical performance.

Hypothesis

3.A Strategic conformity

mediates the negative relationship between the positive affective

traits of CEOs and typical performance by

the firm

3. BStrategic conformity mediates the positive relationship between the negative affective

traits of CEO’s and typical performance by

the firm

Hypothesis

Target Population: Spanish Banking Industries.

Why banking industry?• CEOs a medium latitude of action• Banking industry in Spain experienced strong growth in the period of

analysis.• Low capital intensive industry & allows for product differentiability• This sector underwent deregulation & liberalization

Research Area: Spain .

Sample Size: 44% of the Population .

Methodology

Design and Finalization :

Independent Variable

Research Technique: PANAS ( Positive & Negative Effect Schedule ) .which is

widely used technique. Here all the contents used 5 points scale. Also principle

component analysis. The other methods are Standard Deviation , means,

hierarchical regressions etc.

• Positive Scale (10 Items ) : Interested, Excited, Strong, Enthusiastic, Proud,

Alert, Inspired, Determined , Attentive , Active

• Negative Scale (10 Items): Distressed, Upset, Guilty, Scared, Hostile, Irritable,

Ashamed, Nervous, Jittery, Afraid.

• Reliability , Validity , and test retest Reliability.

Methodology

Control variables (Education , experience & Industry background)

• Long tenured executives exhibited more strategic and performance conformity.

• Education in Management is negatively related to risk taking and extreme performance

and risk taking seems to be associated with non conformist strategic behavior.

Dependent variables (Strategic Conformity & Typical Performance )

• Strategic Conformity : Asset Strategies ( Commercial Loans , Mortgage loans , Leases ,

other long term loans , short term loans to public authorities, non resident loans , cash and

deposits at central banks, securities and fixed assets etc. )

• Typical Performance : ROA ( Standard Return on average assets) , Gross operating

Profit Margins and Net Operating Profit Margins.

Methodology

It is proved by calculation that there must be a relationship between the Predictor (CEO’s Affective Traits) and mediator (Strategic Conformity ). Where as negative affective traits are positively related to strategic conformity . Where as positive affects prompt deviant strategies. It is proved by calculation that there must be a relationship between the Predictor (CEO’s Affective Traits) and the dependent variable(Performance Conformity ). Where the result shows that negative affective traits of CEOs are related to Performance that is ‘typical’ for the industry. It is proved by calculation that there must be a relationship between the mediator (Strategic Conformity) and the dependent variable(Performance Conformity ). ROA=( P=0.59) , Net Operating Profit Margin = (P<0.05) , Gross Operating Profit Margin = (P<0.001)

Finding from the Journal

Positive affects lead to innovative decisions

and negative affects to more careful and

conservative one .

Negative affects leads to the individuals to

adhere data to rely their own mental set until

they found it problematic. Where the

positive effects lead them to abandon their mental sets rather than

to wait for their evidence.

Positive affects increases self

confidence ,so that CEO don’t need others to

validate their actions. Negative affects may lower self confidence.

One interesting finding is , Negative affects

have more influence in performance rather than

positive one.

Some interesting issues observed in this Research

Relationship between affective states and

decision making can be context dependent. It is also interesting issue of

further research.

A strategy should be aligned with the CEOs

characteristics , as negative affective traits should favor for more

conformist strategy ,where as

positive affective traits should favor more

atypical Strategies.

Risk aversion must be considered to measure CEOs affective traits.

The research is based on one specific industry, it must further continue for measuring several

industry CEOs affective traits ,which will allow

genera liability of research.

Recommendations and Further Research Possibilities