Is Chief Executive Officer optimistic belief bad for workers? Evidence from corporate employment decisions
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Date
2023
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Publisher
John Wiley & Sons Ltd
Abstract
Using a behavioural approach, we investigate how Chief
Executive Officer optimism, defined as a personality trait
where a person has optimistic beliefs about the outcome of
future events, influences corporate employment decisions.
Using data of publicly traded firms in the U.S. from 1995
to 2017, we show that firms with optimistic CEOs have
higher employment growth and exhibit less pronounced
employment sensitivity to declining sales than firms with
non-optimistic CEOs do. We also find that the impact of
optimistic CEOs on employment decisions is larger in finan cially constrained firms. We deal with potential endogeneity
issues with the entropy balancing method, propensity score
matching and two-stage least squares regression. Our find ings have important implications for the design and imple mentation of Human Resource Management policie
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Keywords
CEO optimism, employment decisions, financial constraints, sales growth