Oleg V. Petrenko

Research Summary Building on upper echelons theory and implicit leadership theory, we examine if the personal attributes of CEOs of firms undertaking an initial public offering influence the pricing decisions of investment bankers. We argue that charisma and humility in CEOs alter two of the most important decisions of investment bankers: determining the firm's offer price range and setting the firm's actual offer price. Specifically, we argue that the perceptions and negotiation abilities of more charismatic CEOs result in higher offer prices and smaller offer price ranges for their firms. We also argue that the perceptions and negotiation abilities of more humble CEOs result in lower offer prices and broader offer price ranges for their firms. Managerial Summary We investigate how charisma and humility in CEOs of firms undertaking an initial public offering influence two of the most important decisions of investment bankers: determining the firm's offer price range and setting the firm's actual offer price. We show that firms led by more charismatic CEOs enjoy higher offer prices and smaller offer price ranges due to their perceptions of being an effective leader and their strong negotiation abilities. We also show that firms led by more humble CEOs have lower offer prices and broader offer price ranges since humble leaders fall outside of expected perceptions of effective leaders and lack strong negotiation abilities. Ultimately, our study demonstrates the importance of CEO characteristics on pricing decisions throughout the initial public offering process.

Research Summary This study builds on insights from the upper echelons tradition in strategy to examine the effects of chief executive officer (CEO) Machiavellianism on relevant firm costs. While Machiavellianism has been usually construed as a purely negative trait, we argue that the pragmatic focus on the outcomes of exchanges and psychological obsession with winning in transactions that Machiavellian CEOs infuse in their organizations can have important effects on firm cost, a fundamental but frequently understudied driver of financial performance in strategic management research. In line with our arguments, we find that CEO Machiavellianism has negative effects on production costs, financing costs, and acquisition premiums. We find support for our ideas with a sample of S&P 500 CEOs, operationalizing CEO Machiavellianism using a videometric approach Managerial Summary In this study, we investigate the effect of CEO Machiavellianism on firms’ costs. We show that firms with more Machiavellian CEOs will have lower costs than other firms in the market. Rather counterintuitively, this study suggests an explanation for why a personal characteristic that is usually seen as problematic for organizations is rather common in their upper ranks. Ultimately, the study demonstrates the value of the bargaining attitude that Machiavellian CEOs bring to their organizations and suggests this value should be weighed against their risks or acknowledged to manage the risks this common personal characteristic implies.