Extravert CEOs and Strategic M&A Decisions - Ideas for Leaders
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Extravert CEOs and Strategic M&A Decisions

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New research based on 2800 corporate CEOs shows that extraverted CEOs are more likely to engage their firms in the uncertainty of M&A activities, proving that CEO personality can drive firm behaviour. However, under certain conditions, the situation dictates the options available to CEOs, regardless of their personalities. Thus, for example, even less extraverted CEOs make more acquisitions in highly competitive industries.


What influence does a CEO’s personality have on the major strategic decisions of his or her firm? To answer this question, a team of researchers studied the impact of a CEO’s extraverted or introverted nature on his or her company’s M&A activities. 

The team focused on extraversion as a personality trait because of the ‘big five’ core personality traits recognized by psychologists (openness, conscientiousness, agreeableness, neuroticism, and extraversion), extraversion is the most closely related to leadership success. 

As a metric for firm performance, the research team chose M&A activity because engaging in mergers and acquisitions involves consequential strategic decisions in which the outcomes are uncertain. As a result, M&A activity is often linked to an intrepid and influential CEO — the type of CEO who would more likely to be an extravert.

One of the challenges of studying CEO personalities in the past is acquiring sufficient data. CEOs don’t usually have the time or desire to fill out the type of long questionnaires usually needed for such research. However, the researchers were able to use linguistic coding to identify extraverted CEOs. Taking advantage of government laws that require the quarterly corporate calls with stock market analysts to be recorded, they analysed transcripts of 2800 of these calls looking for linguistic cues — such as the number of words used (extraverts are talkative) and repeated use of the third plural ‘we, us’ (extraverts are focused on others as much as self) — to identify which CEOs could be considered extraverts. Then, after gathering data from a variety of other sources to measure M&A activity for each of the 2800 firms, the researchers were able to compare CEO extraversion to M&A activity. 

They found a correlation. Extraverted CEOs were more likely to launch their companies into the uncertain and often hazardous world of mergers and acquisitions — and more often and with larger targets — than less extraverted CEOs. CEO personality is indeed linked to firm behaviour. 

However, the research team also found that certain factors can strengthen or weaken the impact of a CEO’s personality. 

One of those factors is ‘situational strength,’ which refers to situations or circumstances that demand certain actions whether or not the CEO’s personality is comfortable with those actions. For example, a struggling company in a competitive industry needs an acquisition or merger to survive, even if a reticent CEO would rather avoid such an action. In short, the company’s situation gives the CEO no choice in the matter.

Another factor is ‘managerial entrenchment,’ that is, just how strongly entrenched CEOs are in their positions. For example, a CEO that is also the founder of the company has a tight grip on power, and therefore more freedom to let his or her personality guide the firm’s actions. In contrast, a CEO in a company for which there are clearly defined rules that must be followed has less autonomy and thus less opportunity to allow personality to drive actions and decisions.


This research has implications for CEOs, their formal bosses on the Board of Trustees, and even aspiring CEOs. 

The research shows first that not all situations allow for CEO autonomy, which offers an important lesson for even the most forceful CEOs: sometimes you must recognize that you do not have full control.

For boards looking to hire a CEO, this research confirms that CEO personality can make a big difference in the direction and decisions of the company. The question is matching the personality to the situations the new CEO will face. Highly competitive industries, for example, are going to demand action and decisiveness: characteristics of extraverted CEOs. At the same time, boards should also keep in mind that situational strength may negate the CEOs personality no matter how forceful.

Perhaps one of the key lessons of the research is that extraversion is often an asset helping CEOs successfully guide the firm toward significant strategic decisions. Aspiring CEOs and CEOs wishing to improve their performance can learn from what makes extravert CEOs different:

  • A continuous focus on others — engaging others, inspiring others to success — which is why they will use ‘we’ and ‘us’ more than ‘I’ or ‘you.’ 
  • An emphasis on ‘instrumental’ networks: networks that have a purpose beyond linking friends. For example, this research showed that extraverted CEOs tend to be on numerous Boards of Trustees, where they have access to early information about potential acquisitions or mergers opportunities. 
  • The ability to communicate in an engaging manner. This ability helps CEOs sell their M&A actions to shareholders and analysts, who would otherwise normally be bearish on such activities.

Focusing on others along with the self, developing networks with a purpose, and learning to communicate more effortlessly are key leadership attributes exemplified by the extraverted CEOs studied in this research. 



The Acquisitive Nature of Extraverted CEOs. Shavin Malhotra, Taco H. Reus, PengCheng Zhu & Erik M. Roelofsen. Administrative Science Quarterly (May 2017). 

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Idea conceived

May 24, 2017

Idea posted

Jan 2018
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