Beyond Biology? - The Impact of CEO Agency on Investor Reactions during an IPO
Final Report Abstract
Diversity in top leadership positions remains at low levels. Especially CEOs leading publicly listed firms are still predominantly Caucasian and male. We are taking an investor perception perspective to understand how investors contribute to this homogeneity in top level leadership. We investigate investor perceptions of CEO leadership for firms at the stage of an initial public offering (IPO), i.e. when firms get listed in the stock market for the first time. We aim to understand which kind of signals CEOs are sending out are perceived and valued by investors. In a first project, we try to understand how non-verbal behavior forms perceptions of CEO potential to lead. Non-verbal behaviour shapes social evaluation in every kind of human interaction. Yet whether this also holds in a stock market setting remains an unexplored phenomenon. Therefore, we aim to investigate the effects of non-verbal behavior in a setting of US IPOs. We explore how CEOs can shape investor perceptions of potential through nonverbal behavior. We analyse CEO non-verbal behaviour when CEOs present their firm to potential investors in roadshow events. We argue that through expansive movements and nonintrusive gesturing CEOs can convey their ability to lead their firm, thereby reducing uncertainty for investors. Preliminary results support our general idea of non-verbal behavior shaping social evaluations in the stock market. In a second project, we address the male dominance in leadership at the top of firms. One reason for this male dominance in top leadership positions has been found in the congruity of male gender and leadership roles. Both – men as well as leaders – are assumed to show agentic behaviour, such as dominance, ambition, and assertiveness. We build on the assumption of the congruity of male gender and leadership roles, yet take it beyond the male – female – binary. We hypothesize that CEOs are rewarded by investors for behaving agentic in an IPO setting, independent of their biological sex. We use a mixed method approach to investigate this phenomenon. We conduct a field study analyzing videos of CEOs during roadshow events complemented by an experimental study where investment decision based on CEO agentic behavior are made under experimental conditions. With our research we aim to enhance our understanding of how investors contribute to perpetuating the status quo of low diversity in top level by specifically investing in firms lead by CEOs following traditional CEO prototypes.
