Received: 12 October 2020 Revised: 3 January 2021 Accepted: 11 January 2021

DOI: 10.1002/csr.2116

RESEARCH ARTICLE

Executive personality and sustainability: Do extraverted chief

executive officers improve corporate social responsibility?

Karel Hrazdil | Fereshteh Mahmoudian | Jamal A. Nazari

Beedie School of Business, Simon Fraser

University, Burnaby, British Columbia, Canada Abstract
We utilise IBM's Watson Personality Insights service to infer chief executive officers'
Correspondence
Karel Hrazdil, Simon Fraser University, WMC (CEOs') Big Five personality traits and examine whether CEO extraversion, an impor-
3361, 8888 University Drive, Burnaby, BC tant personality trait associated with assertive behaviour, decisive thinking, and
V5A 1S6, Canada.
Email: [email protected] desire for social engagement, is associated with firms' corporate social responsibility
(CSR) practices. Using a longitudinal dataset of Standard & Poor 500 firms for
Funding information
Social Sciences and Humanities Research 2008–2016, we find that firms led by extraverted CEOs' experience higher CSR per-
Council of Canada, Grant/Award Number: formance (both environmental and social), even after controlling for other personality
31-R640084; the Canadian Academic
Accounting Association; the American traits and other CEO- and firm-specific characteristics. In addition, we find that the
Accounting Association relationship between CEO extraversion and CSR performance is more pronounced
among industries with higher environmental impact. Consistent with upper echelons
theory, our results suggest that firms' strategic environmental and social decisions
are significantly influenced by the personal characteristics of corporate executives.

KEYWORDS
Big Five traits, CEO personality, corporate social responsibility, CSR performance,
extraversion

1 | I N T RO DU CT I O N disclosure, up from only 35% in 1999 (KPMG, 2017). Given the impor-
tance of CSR to firm strategy and performance, its rapid growth and
In this article, we examine how extraverted chief executive officers impact on the welfare of numerous stakeholders, it is imperative to
(CEOs) influence firms' corporate social responsibility (CSR) practices. understand what drives CSR practices.
CSR reflects the extent to which a firm actively engages in responsible With the rise of CSR grew the research on CSR determinants.
initiatives and activities (e.g., human rights, community engagement, Since the introduction of upper echelons theory by Hambrick and
employment, and equity) in an economically, socially, and environmen- Mason (1984), who posit that organisational outcomes are ‘reflections
tally sustainable manner in response to a wide range of stakeholder of the values and cognitive biases of powerful actors’ and that individ-
interests and demands (McWilliams & Siegel, 2001; Nazari ual executives have a significant influence on corporate policies and
et al., 2017). CSR significantly influences a firm's long-term financial activities (p. 193), numerous studies provide evidence supporting that
performance and market value (El Ghoul et al., 2011; Margolis & CEOs exert significant influence on corporate decisions related to
Walsh, 2003); therefore, publicly traded companies face increasing financial reporting and firm performance (Plöckinger et al., 2016).
pressure from various stakeholders to be accountable for their CSR Utilising upper echelons theory as an organising framework,
initiatives and to inform the public about their CSR activities researchers investigate the determinants of CSR and highlight the
(Herremans et al., 2016). As a result, CSR reporting has experienced importance of CEOs' ability and personality in influencing corporate
rapid growth over the last two decades (Stolowy & Paugam, 2018): as policies and outcomes in a variety of CSR settings. For example,
of 2017, 93% of Fortune Global 250 firms provided voluntary CSR recent studies document that demographics and personal attributes

This is an open access article under the terms of the Creative Commons Attribution NonCommercial License, which permits use, distribution and reproduction in any
medium, provided the original work is properly cited and is not used for commercial purposes.
© 2021 The Authors. Corporate Social Responsibility and Environmental Management published by ERP Environment and John Wiley & Sons Ltd.

1564 wileyonlinelibrary.com/journal/csr Corp Soc Responsib Environ Manag. 2021;28:1564–1578.

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HRAZDIL ET AL. 1565

(i.e., age, qualification, financial expertise, political ideologies, ability, any self-assessment-based responses may suffer from social desirability
mentality, and green behaviours) of leaders influence their subordinates bias and inflation (Cycyota & Harrison, 2002). In our study, we utilise a
and translate into collective action towards sustainable performance, novel technique based on linguistic analytics software developed by
environmental performance, and environmental reporting (García- IBM to assess the personality traits of CEOs in a large sample setting,
Sánchez & Martínez-Ferrero, 2019; Gupta et al. 2019; Horbach & with a high level of validity and objectivity. Specifically, we utilise the
Jacob, 2018; Kim et al. 2017; Shahab et al., 2020). Others find that IBM Watson Personality Insights service (Watson PI) to process tran-
materialistic, confident, and hubristic CEOs are less keen on socially scripts of CEOs' responses to analyst questions during year-end confer-
responsible activities (Davidson et al., 2019; McCarthy et al., 2017; ence calls of all S&P 500 firms during 2008–2016. We collect data on
Tang et al., 2015); and that CSR performance is positively associated the Big Five personality traits because they portray basic underlying
with CEOs' narcissism (Petrenko et al., 2016; Yook & Lee, 2020), CEOs' trait dimensions of personality (Goldberg, 1990) and are recognised as
liberal orientation (Gupta et al., 2019), CEOs' educational backgrounds, genetically based, relatively stable, and generalisable across cultures
breadth of CEO's career experience (Manner, 2010), CEOs' functional (Cobb-Clark & Schurer, 2012; McCrae & Costa, 1997). Based on these
and educational background, tenure (Cho et al., 2019; Huang, 2013), data, we test whether firms led by extraverted CEOs experience better
and CEOs' succession (Liu, 2020). Other personality traits have received CSR performance, after controlling for the remaining personality traits
less attention, partly because of the difficulty in objectively estimating and other firm-specific characteristics. Our approach relies on a recent
the aggregate personality profiles of executives. analysis by Hrazdil et al. (2020), who provide several validation tests for
Despite the overwhelming evidence supporting upper echelons the Watson PI personality traits based on a large sample of US firms
theory in different settings (including CSR), there is little systematic (9431 firm-year CEO observations during 2002–2013). Specifically,
research on how CEOs' core personality traits, such as Big Five person- Hrazdil et al. (2020) demonstrate that all Big Five firm-level CEO per-
ality traits—openness (the degree of intellectual curiosity, creativity and sonality traits are CEO-specific and are not affected by firm characteris-
a preference for novelty and variety), conscientiousness (tendency to tics or firm performance.
act in an organised or thoughtful way), extraversion (tendency to seek Our study makes three important contributions to the upper eche-
stimulation in the company of others), agreeableness (tendency to be lon and stakeholder theories in the CSR setting. First, to our knowledge,
compassionate and cooperative), and neuroticism (the extent to which this study is the first to analyse whether firms led by extraverted CEOs'
a person's emotions are sensitive to the person's environment1—relate experience better CSR performance. Because of the challenges associ-
to CSR. Of the Big Five traits, psychology research identifies extraver- ated with objectively estimating inherent executive personality traits in
sion as the trait that is most closely associated with leadership emer- a large sample setting, prior CSR literature examines single dimensions
gence (Bono & Judge, 2004; Do & Minbashian, 2014; Green of CEOs' personalities, such as materialism, power, narcissism, self-con-
et al., 2019; Judge et al., 2002). Extraverted individuals have a tendency fidence, and pride or combines analyses of observable CEO characteris-
for positive and decisive thinking, assertive behaviour, and a desire for tics such as gender, age, political ideology, education and career
social engagement (Costa & McCrae, 1992; Wilt & Revelle, 2016), experience, and expertise to provide supporting evidence for the two
which are important characteristics that extraverted CEOs may utilise theories (Davidson et al., 2019; Horbach & Jacob, 2018; Manner, 2010;
when transforming uncertain opportunities into actions. Not surpris- Petrenko et al., 2016; Shahab et al., 2020; Tang et al., 2015; Walls &
ingly, extraversion has been linked to effective and transformational Berrone, 2017). Using a comprehensive sample of S&P 500 firms in the
leadership, wherein prior research documents that extraverted CEOs period 2008–2016 (2949 firm-year observations), we find supporting
have significant influence on firms' cost of equity (Adebambo evidence for our prediction that firms led by extraverted CEOs experi-
et al., 2019), analysts' forecasts (Becker et al., 2016), emissions-reducing ence better CSR performance (after controlling for other CEO personal-
behaviour (Brick & Lewis, 2014), their own career and firm outcomes ity traits and firm-specific characteristics).
(Green et al., 2019), and mergers and acquisitions activities (Malhotra We further document that firms with more conscientious, less
et al., 2018). However, despite the overwhelming evidence supporting open, less agreeable, and less neurotic CEOs experience significantly
upper echelons theory in a variety of organisational outcomes, prior higher CSR performance, which provides a second important contri-
research has paid relatively little attention to whether and how firms bution, as the theories on how the remaining Big Five personality
led by extraverted CEOs engage in CSR practices. traits (openness, conscientiousness, agreeableness, and neuroticism)
Our study addresses a gap in the literature and a recent call for fur- relate to CSR are scarce. Earlier studies exploring the links between
ther research by Yook and Lee (2020), by examining how direct mea- specific Big Five personality traits and attitudes towards different
sures of personality traits affect CSR. This study is innovative in that it environments provide mixed evidence: some studies highlight the role
examines and provides evidence on whether extraverted CEOs influ- of conscientiousness and related specific traits (Pettus & Giles, 1987),
ence firms' CSR performance. Our primary motivation to investigate while others identify the effects of traits related to extraversion and
this topic is the lack of empirical support on how Big Five personality neuroticism in relation to their effects on different aspects of environ-
traits influence CSR, which stems from the challenges in inferring inher- mental engagement (Borden & Francis, 1978; Hirsh & Peterson, 2009;
ent executive personality traits, because CEOs of large public firms are Wiseman & Bogner, 2003). However, these studies fail to assess all
often unwilling to undergo psychometric tests or respond to surveys Big Five dimensions of personality simultaneously, which means that
about their underlying personality profiles (Ham et al., 2017). Moreover, they cannot rule out idiosyncratic findings that may result from
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1566 HRAZDIL ET AL.

construct overlap. Recent studies address this concern and consider p. 193) define organisational outcomes as the ‘reflections of the
all Big Five traits together as well as their associations with environ- values and cognitive biases of powerful actors’ (i.e., of the ‘upper ech-
mental engagement (Hirsh, 2010; Hirsh & Peterson, 2009; Nisbet elons’) in organisations. According to upper echelons theory, the way
et al., 2009); however, as these studies focus only on environmental such actors interpret situations, challenges, or decisions they confront
engagement, their findings cannot be generalised to all dimensions of are influenced by their experiences, values, and personalities, which,
CSR performance, which also includes social performance. in turn, influence their strategic choices and organisational effective-
Finally, prior literature often analyses personality traits of individ- ness (Hambrick, 2007).
uals who are not corporate executives (i.e., students, consumers, com- With the growing evidence supporting upper echelons theory,
munities, and nations), wherein different groups of individuals have several different approaches to measuring managers' personality traits
different attitudes towards environmental engagement (Borden & have emerged in recent years. First, recent studies use managerial
Francis, 1978; Milfont & Sibley, 2012; Wiseman & Bogner, 2003). We fixed effects or utilise age and gender to capture characteristics of
fill these gaps in the literature and focus on CEOs' extraversion (con- individual executives (Ge et al., 2011; Zu & Song, 2009). Another
trolling for other Big Five traits) and both dimensions of CSR perfor- approach is to infer personality from the actions that managers take.
mance (environmental and social), together and separately. We also Studies such as Hribar and Yang (2016) use option-exercise behaviour
partition our analysis into specific components of environmental and and popular press characterisations of CEOs to infer their personality
social performance, such as CSR related to use of resources, emis- traits; Bamber et al. (2010) use managers' backgrounds, such as mili-
sions, innovation, work force, human rights, community, and product tary experience and birth prior to World War II, to estimate conserva-
responsibility. We show that of the Big Five personality traits, CEO tive managerial traits; Olsen et al. (2014) and Ham et al. (2017) infer
extraversion has the most consistent and positive influence on all of CEO and CFO narcissism based on the size and composition of the
these components (except human rights). CEO's picture and by the size of notarised CFO signatures in the
Our findings have important implications for corporate boards, annual report, respectively; and Davidson et al. (2019) define the
shareholders, and policy makers. For example, boards of directors and materialism of CEOs based on their relative ownership of luxury
shareholders are interested in executive personality profiles that dif- goods. Inferring personality from managerial actions has shown lim-
ferentiate CEOs from other executives and are indicative of their suc- ited ability to explain underlying personality characteristics because
cess in different settings. Given that the benefits of CSR investments such actions are often influenced by many other factors, and corpo-
are argued to be realised over the long run, the outcomes of these rate outcomes are often reflections of a combination of multiple per-
investments are unknown and therefore risky in the short term. Con- sonality traits. Finally, researchers have inferred personality
sistent with the recent line of research that shows that CEO charac- dimensions such as the Big Five personality traits through the admin-
teristics, personal values, and background are determinants of their istration of surveys known as personal inventory scales (Hirsh &
corporate commitment to CSR, our findings inform boards of directors Dolderman, 2007; Milfont & Sibley, 2012). While research shows that
that selection of CEOs with certain personality traits may increase the these measurements are reliable, administering these types of tests
firm's propensity to engage in CSR and exhibit improved CSR perfor- on a large scale is not feasible because direct access to the highest
mance. Governance mechanisms and boards that are supportive of level of decision-making authority is impractical and impossible. As
CSR investments by highly extraverted CEOs are critical for improve- Ham et al. (2017, p. 1090) note, ‘executives are understandably
ments in CSR performance. Our findings additionally inform unwilling to complete surveys or questionnaires to directly measure
policymakers about the determinants of CSR performance, with impli- personality traits such as narcissism’.
cations for any proposed regulations regarding effective corporate A different stream of research relies on psychology and psycho-
governance (OECD, 2015) and CSR practices (GRI standards).2 linguistics theories that language can provide insight into a speaker's
The remainder of the article is organised as follows. Section 2 personality type, thinking style, and emotional state. For instance, the
reviews the prior literature and develops the hypotheses. In Section 3, frequency with which speakers use certain categories of words can
we discuss our data and methodology. Section 4 presents the empiri- provide clues and word usage in written communications can predict
cal results, and Section 5 concludes. aspects of personality (Fast & Funder, 2008; Hirsh & Peterson, 2009;
Yarkoni, 2010). More recent studies began measuring executive per-
sonality traits more directly and objectively and estimated Big Five
2 | RELEVANT LITERATURE AND traits from CEOs' written and verbal forms of communication, all-
HYPOTHESES owing them to simultaneously assess different dimensions of person-
ality, which is critical to rule out the possibility that prior studies'
2.1 | Upper echelons theory and personality findings are merely idiosyncratic. For example, Patelli and
characteristics Pedrini (2015) estimate CEO integrity based on the language used by
CEOs in shareholder letters; Larcker and Zakolyukina (2012) develop
A central tenet of the strategic leadership literature is that organisa- word categories, based on which they measure managerial deception
tions are reflections of their top executives' unique backgrounds and in conference calls; and some utilise advancements in computational
personalities (Finkelstein et al., 2009). Hambrick and Mason (1984, linguistics to gauge personality directly from transcribed speeches by
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HRAZDIL ET AL. 1567

CEOs (Harrison et al., 2019; Mairesse et al., 2007; Malhotra responsible activities tend to have CEOs with international assign-
et al., 2018). These studies use computer programming to derive Big ment experience (Slater & Dixon-Fowler, 2009), female CEOs, or
Five personality scores from earnings conference calls with financial CEOs with a bachelor's degree in humanities and broad career experi-
analysts. Based on previous research that links measurable linguistic ence (Manner, 2010), whereas firms with short-term CEO compensa-
features to personality traits, they extract relevant features from tion and with CEOs approaching retirement are less likely to show
CEOs' responses to questions raised by analysts, including frequency good CSR performance (Deckop et al., 2006; Kang, 2010). This stream
counts of word categories from the Linguistic Inquiry and Word Count of research, however, does not produce uniform results and is silent
and additional features from the MRC Psycholinguistic database. on whether and how the psychological biases of CEOs play a role in
However, the use of a predictive scoring technique based on self- firms' CSR performance. For example, Zu and Song (2009) find that
constructed word categories is a more subjective approach and lacks age and education are not statistically significant determinants of CSR
validation in large samples. activities.
We overcome these obstacles by utilising machine-learning soft- Another stream of research explores the psychological orientation
ware developed and validated by IBM that continually evolves and of managers and how cognitive factors influence positive CSR
improves over time and is available at low cost to other researchers.3 engagement and performance (Wong et al., 2011). For example, prior
IBM developed several personality models using text from blogs, research provides evidence that CSR practices are positively
essays, and tweets to predict aspects of personality, including the Big influenced by the liberal political ideologies of CEOs (Chin
Five traits. In addition to being validated by IBM, the Watson PI has et al., 2013; Gupta et al., 2019), CEOs' narcissism (Petrenko
been thoroughly tested by Hrazdil et al. (2020), who provide several et al., 2016), and hubris (Arena et al. 2018); in contrast, firms managed
validation tests of whether the Big Five personality traits, based on by materialistic, confident, and hubristic CEOs experience lower CSR
CEOs' answers to analysts' questions during conference calls, are performance (Davidson et al., 2019; McCarthy et al., 2017; Tang
manager-specific. First, using a large sample of US firms (9431 firm- et al., 2015). These studies examine certain personality traits one at a
year observations during the period 2002–2013), the authors demon- time and rarely consider multiple psychological traits together in their
strate that all firm-level CEO personality traits are manager-specific research designs (except for controlling for demographic characteris-
and unrelated to firm characteristics and firm performance, on which tics), wherein a single trait in isolation is unlikely to be the sole deter-
the CEOs comment during the conference calls. When the authors minant influencing CEOs' decisions to invest in CSR.
add CEO fixed effects into regression analyses of the Big Five traits Prior studies that examine multiple personality traits based on a
2
on firm characteristics, the Adjusted R increases more than when well-established psychological framework in connection with both
firm fixed effects are added. These findings demonstrate that each of social and environmental dimensions of CSR are rare. Many specific
the Big Five traits is closely related to each individual CEO. Second, personality traits in relation to pro-environmental attitudes and
the authors find that in years when firms appoint new executives, behaviours have been examined over the years. For example, higher
year-to-year changes in firm-level CEO Big Five traits are significantly pro-environmental attitudes are evident among individuals who are
greater, which further supports the view that the Big Five traits cap- more enthusiastic, extraverted, and mature (Borden & Francis, 1978);
ture CEO characteristics rather than organisational characteristics. more conscientious (Kim et al., 2017), self-confident, and sincere
This previously documented validation provides us with a necessary (Pettus & Giles, 1987); more agreeable and open to new experiences
step towards testing the association between CEO personality and (Hirsh & Dolderman, 2007; Nisbet et al., 2009); and more neurotic
CSR performance. (Hirsh, 2010). These findings, however, are only limited to people's
environmental concerns and preferences; furthermore, they are based
on small samples and rarely analyse corporate executives.
2.2 | Literature on personality and CSR Utilising machine learning analytical software with a high level of
validity and objectivity to assess the personality traits of CEOs in a
According to stakeholder theory, firms act in a socially responsible large sample setting helps overcome the measurement challenges in
manner by attending to the interests of their stakeholders (McGuire prior literature and allows us to determine the inherent personality
et al., 2003; Tang et al., 2015), wherein CEOs determine appropriate traits of CEOs. Our study is therefore among the first to assess how
course of actions when responding to stakeholders' interests CEOs' Big Five dimensions of personality in general (and extraversion
(Donaldson, 1999).4 Furthermore, individual differences in caring and in particular) collectively help explain firms' CSR performance.
empathy for the environment and society are derived from differ-
ences in individuals' value orientations (Hansla et al., 2008). Because
executives play an important role in CSR, CEOs' characteristics are 2.3 | Hypothesis development
likely related to the extent to which firms engage and act in a socially
responsible manner (Donaldson, 1999; Manner, 2010). One stream of Guided by the upper echelons perspective and stakeholder theory, we
research on how corporate executives influence CSR performance argue that extraverted CEOs are more likely to participate in CSR activi-
focuses on CEOs' personal backgrounds and experiences. For exam- ties because of their distinctive motivational tendencies as leaders. Of the
ple, prior literature documents that firms that engage more in socially Big Five traits, extraversion is most closely associated with leadership
 15353966, 2021, 6, Downloaded from https://onlinelibrary.wiley.com/doi/10.1002/csr.2116, Wiley Online Library on [03/07/2024]. See the Terms and Conditions (https://onlinelibrary.wiley.com/terms-and-conditions) on Wiley Online Library for rules of use; OA articles are governed by the applicable Creative Commons License
1568 HRAZDIL ET AL.

(Bono & Judge, 2004; Do & Minbashian, 2014; Green et al., 2019; Judge aspects of personality. IBM validated the PI service by comparing
et al., 2002). Prior research documents that the assertive leadership of survey-based scores of over 1500 participants responding to tradi-
extraverts stems from their approach behaviour rather than avoidance tional psychometric tests to scores derived from its own personality
behaviour (John & Srivastava, 1999); their ability to influence others' software model, and reported an average mean absolute error and
behaviour, which creates a more positive social environment around them average correlation between the inferred and actual scores for the dif-
(Eaton & Funder, 2003); and their skill to excel in complex environments ferent categories of personality characteristics of 0.12 and 0.33,
which arises from their ability to effectively deal with situations involving respectively, which places Watson PI at the cutting edge of personal-
multiple stimuli (Matthews et al., 2003). ity inference from textual data (Plank & Hovy, 2015; Schwartz
The instrumental stakeholder perspective highlights the role of et al., 2013).7
stakeholders and firm reputation in determining CSR activities CEOs are the principal decision-makers of the firm (Graham
(Hillman & Keim, 2001; Wang et al., 2008), which in turn help firms et al., 2013). Accordingly, we utilise the IBM Watson PI to process
increase revenues through greater consumer support (Lev transcripts of the Q&A sessions of conference calls made by CEOs
et al., 2010), attract higher quality workforce (Greening & during the period 2008–2016 to obtain data on their Big Five person-
Turban, 2000), develop better relationships with the government ality traits. As inputs into Watson PI, we use publicly available tran-
(Campbell, 2007), and increase legitimacy from the community scribed conference calls related to firms' fiscal year-end performance,
(Fombrun et al., 2000).5 Because CSR activities involve different inter- which controls for the underlying economic news communicated in
nal and external stakeholders (including boards, employees, external the disclosure (i.e., the earnings surprise).
communities, and government agencies) and given that such activities Conference calls represent an important voluntary disclosure mech-
attract considerable media attention (Liu & McConnell, 2013), extra- anism (Davis et al., 2015) because they include both a formal presenta-
verted CEOs are more comfortable responding to different stake- tion and a question-and-answer (Q&A) segment related to any aspect
holders and relying on available resources and support, and therefore of firm disclosure and performance. The presentation segment is not
more likely to seek such interactions than less extraverted executives suitable for assessing CEO personality because the text used in the pre-
(Ashton et al., 2002; Eaton & Funder, 2003). Furthermore, because sentation is likely scripted by others. By contrast, executives are more
‘extraverted CEOs are more enthusiastic about growth opportunities likely to speak freely in their natural tone, expressing their opinions on
(Watson & Clark, 1997) and perceive growth opportunities more posi- questions posed by analysts during the Q&A sessions. Questions posed
tively because they are driven by their ambition and promotion focus by analysts can be quite difficult for CEOs because these inquiries are
(preferring gains and growth as opposed to stability and security, Gor- often direct, not easily anticipated, and, furthermore, CEOs' answers are
man et al., 2012); if implemented successfully, CSR activities can help consequential because capital markets respond instantly to the informa-
accomplish such growth.6 Accordingly, we predict that extraverted tion provided in these calls (Price et al., 2012). As a result, text spoken
CEOs are more inclined to participate in community and socially during the Q&A segment is more likely unscripted and is therefore more
responsible activities, which, in turn, will be positively reflected in CSR suitable for personality analysis (Mairesse et al., 2007; Malhotra
performance. We state our hypothesis in alternative form as follows: et al., 2018; Matsumoto et al., 2011). Following this literature, we utilise
the CEOs' answers to questions raised by analysts.8
Hypothesis: There is a positive association between CEO extraversion For each conference call where the CEO answers questions from
and firm's CSR performance. analysts, we retain all CEO responses with at least 100 words, which
is the minimum number required by Watson PI, and use these parsed
responses as inputs into the software, which then outputs the Big
3 | D A T A A N D M E T H O D O LO G Y Five personality dimensions as the normalised percentile score rela-
tive to Watson PI's sample population. The scores range from 0 to
3.1 | Measuring personality 100, where 99 indicates the 99th percentile of the population. To test
our hypothesis, we focus on CEO extraversion and control for the
IBM Watson is an artificial intelligence hybrid system software, which remaining four personality traits.
is based on the concept of cognitive computing—a technique compris-
ing machine learning, natural language processing, artificial intelli-
gence, human interaction, and reasoning. The PI service is one of 3.2 | Measuring CSR
Watson's applications, developed based on the work of Fast and
Funder (2008), Hirsh and Peterson (2009), and Yarkoni (2010), who We collect social and environmental data for the period 2008–2016
document that the frequency with which speakers use certain catego- from Thomson Reuters DataStream ASSET4 database. ASSET4 is con-
ries of words can predict various aspects of personality. The software sidered one of the leading global sources for data on environmental
enables applications to derive insights from digital communications, and social performance (Haque, 2017). The database includes a large
such as essays, blogs, and forum posts and uses linguistic analytics to number of environmental, social, and governance indicators to deter-
infer individuals' intrinsic personality characteristics from several per- mine the overall ESG score. Drawing on earlier research, we only
sonality models (e.g., Big Five, Needs and Values) to predict different examine CSR along the environmental and social dimensions (Kim
 15353966, 2021, 6, Downloaded from https://onlinelibrary.wiley.com/doi/10.1002/csr.2116, Wiley Online Library on [03/07/2024]. See the Terms and Conditions (https://onlinelibrary.wiley.com/terms-and-conditions) on Wiley Online Library for rules of use; OA articles are governed by the applicable Creative Commons License
HRAZDIL ET AL. 1569

et al., 2012). The environmental dimension includes three categories, X

5
CSR− ESit = α0 + αj CEOPersonalityit
namely, emissions reduction, resource consumption, and product j=1
innovation, whereas the social dimension includes the categories of X11 X14 X8
+ β Controls +
k=1 k
;
k=1 k
Industry + λ
l=1 l
Year + uit , ð1Þ
workforce, human rights, community, and product responsibility.

where the overall corporate sustainability performance (CSR-ES) is

3.3 | Sample selection the average of component scores related to environmental (CSR-E)
and social (CSR-S) ratings; CEOPersonalityit is the matrix of the Big
To construct the sample, we first collect all year-end conference call Five personality traits of the CEO for firm i in year t; and the Con-
transcripts from Factiva for American firms that were part of the S&P trols matrix includes the following variables: CSR-Com (CSR Commit-
500 Index during 2008–2016. We follow Hrazdil et al. (2020) and tee) [dummy variable that equals 1 if there is a CSR committee at
exclude observations with transcripts that are shorter than 100 words the board level; 0 otherwise]; Independence (Board Independence)
in length. This initial sample consists of 3753 firm-year observations [proportion of nonexecutive members on the board]; Duality (CEO
of the CEO's personality data and includes between 265 and 368 firms Duality) [dummy variable that equals 1 if the CEO also holds the
each year. We then collect environmental and social performance data position of chairman of the board; 0 otherwise]; Age [age of the
from the Thomson Reuters DataStream and financial data from Com- CEO in year t]; Gender [dummy variable that equals 1 if the CEO is
pustat. We lose an additional 804 observations from our sample female; 0 otherwise]; Tenure [number of years that the executive
because of missing CSR performance data and control variables. The has been CEO]; Size [natural logarithm of total assets as of the end
final sample includes 2949 firm-year observations from 15 different of fiscal year t–1]; Return on Assets (ROA) [income before extraordi-
industry groups based on the North American Industry Classification nary items in year t divided by total assets at the end of fiscal year
System. Table 1 presents the breakdown of our sample into firm-year t–1]; Leverage [total liabilities to total assets]; CAPX (Capital Spend-
observations across different industry groups, where the largest firm ing Intensity) [capital spending in year t–1 divided by total sales rev-
representation comes from the manufacturing sector. enues in year t–1]; Plant newness (Newness) [the net properties,
plant, and equipment at the end of fiscal year t–1 divided by the
gross properties, plant, and equipment at the end of fiscal year t–1];
3.4 | Model and Tobin's Q (MVE + PS + DEBT)/TA [(product of a firm's share
price and the number of common stock shares outstanding + the liq-
To examine the impact of personality on CSR performance,9 we use uidating value of the firm's outstanding preferred stock + value of
the following model (Equation 1) to test our hypotheses. the firm's short-term liabilities net of its short-term assets, plus the

TABLE 1 Sample

NAICS Industry sector 2008 2009 2010 2011 2012 2013 2014 2015 2016 Total
11 Agriculture, Forestry, Fishing & Hunting 1 1 1 1 1 1 1 1 1 9
21 Mining, Quarrying, Oil & Gas Extraction 19 18 17 21 20 21 21 20 19 176
22 Utilities 21 16 20 21 22 23 21 25 21 190
23 Construction 5 4 4 5 4 4 4 4 5 39
31,32,33 Manufacturing 121 120 103 129 140 147 151 154 154 1219
42 Wholesale Trade 7 8 8 8 9 9 9 9 10 77
44, 45 Retail Trade 18 18 15 20 23 23 22 24 25 188
48, 49 Transportation & Warehousing 11 12 9 14 12 12 15 17 17 119
51 Information 19 24 21 23 23 21 24 28 28 211
52 Finance & Insurance 33 39 31 36 37 40 42 39 40 337
53 Real Estate, Rental & Leasing 14 15 13 19 19 20 23 22 22 167
54 Professional, Scientific & Technical Services 6 5 6 7 8 8 7 7 6 60
56 Administrative, Support & Waste Management 6 7 7 7 7 6 7 7 8 62
62 Health Care & Social Assistance 5 4 4 6 5 6 6 5 4 45
72 Accommodation & Food Services 4 7 6 6 6 5 5 6 5 50
Total 290 298 265 323 336 346 358 368 365 2949

Note: This table presents the breakdown of our final sample into firm-year observations available each year for different industries, based on the NAICS
(North American Industry Classification System). Two-digit NAICS level represents the industry sector.
 15353966, 2021, 6, Downloaded from https://onlinelibrary.wiley.com/doi/10.1002/csr.2116, Wiley Online Library on [03/07/2024]. See the Terms and Conditions (https://onlinelibrary.wiley.com/terms-and-conditions) on Wiley Online Library for rules of use; OA articles are governed by the applicable Creative Commons License
1570 HRAZDIL ET AL.

firm's long-term debt)/book value of the total assets), all at the end Table 4 provides several noteworthy results. We document that
of fiscal year t–1]. extraversion and other Big Five traits explain a significant variation
Our choice of controls for the above model is consistent with (approximately 19% when fixed effects are included) in CSR scores
the literature that has found significant associations between these (in both environmental and social dimensions); that all Big Five traits
controls and CSR performance. For example, the CSR committee has are significantly associated with CSR performance; and that most Big
been found to have a significant positive impact on social and envi- Five traits are significantly associated with each of the environmental
ronmental performance (Hussain et al., 2018) because the existence and social dimensions of CSR performance.
of the committee at the board level is an indication of a firm's com- The results provide support for our main hypothesis that firms led
mitment to CSR. Board independence can help to ensure that a by highly extraverted CEOs experience significantly higher CSR per-
CEO's decisions in relation to CSR are compliant with the social and formance. The results are also consistent when examining the impacts
environmental demands of various stakeholder groups (Jain & of extraversion on environmental and social dimensions of CSR per-
Jamali, 2015). Previous research uses a number of CEO-specific con- formance. These consistent results provide support for the claim in
trol variables, including CEO duality, age, gender, and tenure, that the literature that extraversion is trait that is more closely related with
might affect corporate CSR decisions (Petrenko et al., 2016). We leadership emergence and transformational leadership (Bono &
also control for a number of firm-specific variables identified previ- Judge, 2004). Transformational leadership is instrumental in CSR deci-
ously as factors that might affect CSR (Clarkson et al., 2008). These sions (Khan et al., 2018). Extraverted CEOs are influential, ambitious,
controls include firm size, ROA, financial leverage, percentage of and positive (Bono & Judge, 2004) and these transformational leader-
capital expenditures to total revenues, newness of plant and equip- ship attributes will create enthusiasm among those following CEOs'
ment, and Tobin's Q. decisions including various stakeholder groups. Extraverted CEOs are
comfortable engaging with various stakeholders and relying on avail-
able resources and support (Ashton et al., 2002; Eaton &
4 | RESULTS AND DISCUSSION Funder, 2003) when needed to make socially responsible decisions.
The results showing the significant and positive impact of extraver-
Table 2 presents the descriptive statistics, wherein all variables follow sion on CSR are consistent with the stream of research that has found
a normal distribution. CEO extraversion and other Big Five personality this trait to be the predominant personality dimension that predicts
measures range between 0 and 100, where the values represent per- CEOs' decisions (Becker et al., 2019).
centiles relative to the whole population. The demographic data on Of the remaining Big Five traits, we find that firms with more con-
CEOs show that the average age of the CEOs in our sample is approx- scientious, less open, less agreeable, and less neurotic CEOs experi-
imately 56 years, and approximately 97% of CEOs are males. The dis- ence significantly higher CSR performance (both environmental and
proportion between male and female CEOs is comparable to other social). The negative impact of agreeableness and neuroticism on CSR
settings in which researchers find the ratio of women CEO to be a is consistent with the findings of Soliño and Farizo (2014), who report
small (Birindelli et al., 2019). The average CEO tenure was about significant negative influences of agreeableness and neuroticism on
7 years, with tenure ranging between 1 and 33 years. consumer preferences for the development of an environmental pro-
Table 3 reports Spearman correlations between CSR perfor- gram. The result showing a negative association between openness
mance, CEO personality, and all control variables. Several correlations and CSR contradicts the results of some of the earlier studies (Brick &
are worth noticing: first, there are positive and significant correlations Lewis, 2014; Milfont & Sibley, 2012). There are a number of notewor-
between some of the Big Five traits and CSR performance (and its thy differences between our research design and those of earlier stud-
components). For instance, continuousness, extraversion, and agree- ies. Specifically, previous studies have examined the association
ableness are significantly correlated with CSR, whereas openness and between personality traits and pro-environmental behaviour in small
neuroticism are not significantly correlated with CSR. Second, the cor- samples, using self-reported surveys. Our research design is different
relations between the control variables and CSR suggest that the for- from prior literature in that we utilise machine learning software with
mer are significant determinants of CSR and including them in the a high level of validity and objectivity to assess personality traits of
model does not indicate the possible presence of multicollinearity. CEOs in a large sample setting, where we expand our analysis of pro-
Finally, even though individual personality traits are highly correlated, environmental behaviour to both the social and environmental dimen-
earlier research suggests using them all at once in statistical analysis sions of CSR. In doing so, we help to minimise type I errors (observing
pertaining to an individual trait (Hirsh, 2010; Hirsh & Peterson, 2009; a difference when none exists) and type II errors (failing to observe a
Nisbet et al., 2009). difference where one does exist).
We report the results of our hypothesis tests in Table 4. We pre- Finally, controlling for previously documented determinants of
sent regression models separately for dependent variables: total envi- CSR performance, we find that firms with CSR committees at the
ronmental and social performance (CSR-ES in models 1 and 2) and board level (Hussain et al., 2018), independent board members (Jain &
each of its components (CSR-E in models 3–4 and CSR-S in models Jamali, 2015), and female CEOs (Manner, 2010) experience signifi-
5–6, respectively). Following Becker et al. (2019), we present the cantly better CSR performance. Consistent with previous studies, we
results with and without controls. further find that while larger firms with higher operating performance
 15353966, 2021, 6, Downloaded from https://onlinelibrary.wiley.com/doi/10.1002/csr.2116, Wiley Online Library on [03/07/2024]. See the Terms and Conditions (https://onlinelibrary.wiley.com/terms-and-conditions) on Wiley Online Library for rules of use; OA articles are governed by the applicable Creative Commons License
HRAZDIL ET AL. 1571

TABLE 2 Descriptive statistics

Variables N Mean Median SD Min Max

CSR-ES 2949 47.80 48.28 22.72 5.04 89.96
CSR-E 2949 42.32 44.46 28.49 0.00 92.33
CSR-E1 2859 28.40 15.38 31.73 0.00 95.60
CSR-E2 2949 49.41 53.33 33.41 0.00 98.94
CSR-E3 2949 46.82 50.58 32.43 0.00 99.09
CSR-S 2949 53.31 53.84 20.50 9.63 94.23
CSR-S1 2949 28.66 6.47 33.72 0.00 96.88
CSR-S2 2949 57.69 59.68 24.51 3.88 98.79
CSR-S3 2949 48.23 44.53 29.02 0.00 97.99
CSR-S4 2949 93.52 95.00 6.02 66.00 100.00
CEO-E 2949 43.70 43.00 18.38 6.00 86.00
CEO-O 2949 93.52 95.00 6.02 66.00 100.00
CEO-C 2949 74.76 77.00 13.18 36.00 96.00
CEO-A 2949 18.04 14.00 13.23 1.00 64.00
CEO-N 2949 81.49 83.00 8.84 54.00 96.00
CSR-Com 2949 0.60 1.00 0.49 0.00 1.00
Independence 2949 82.52 84.62 9.93 42.86 93.75
Duality 2949 0.52 1.00 0.50 0.00 1.00
Age 2949 56.43 57.00 5.85 39.00 76.00
Gender 2949 0.03 0.00 0.18 0.00 1.00
Tenure 2949 6.58 5.00 6.06 1.00 33.00
Size 2949 9.68 9.62 1.20 6.52 12.27
ROA 2949 6.82 6.05 4.74 −2.83 21.95
Leverage 2949 0.62 0.61 0.20 0.03 2.03
CAPX 2949 8.62 3.83 14.33 0.00 92.88
Newness 2949 0.51 0.49 0.14 0.15 1.00
Tobin's Q 2949 1.61 1.28 1.27 −0.01 7.37

Note: The variables are defined as follows. The overall corporate sustainability (CSR-ES) performance is the average of the environmental (CSR-E) and
social (CSR-S) ratings, divided into environmental product innovation (CSR-E1), resource use (CSR-E2), emissions reduction (CSR-E3), community (CSR-S1),
human rights (CSR-S2), workforce (CSR-S3), and product responsibility (CSR-S4); CEO characteristics are denoted by O [openness], C [conscientiousness],
E [extraversion], A [agreeableness], N [neuroticism], that are based on conference calls during year t; CSR-Com (CSR Committee) [dummy variable that
equals 1 if there is a CSR committee at the board level; 0 otherwise]; Independence (Board Independence) [proportion of nonexecutive members on the
board]; Duality (CEO Duality) [dummy variable that equals 1 if the CEO also holds the position of the chairman of the board; 0 otherwise]; Age [age of the
CEO in year t]; Gender [dummy variable that equals 1 if the CEO is female; 0 otherwise]; Tenure [number of years that the executive has been CEO]; Size
[natural logarithm of total assets as of the end of fiscal year t–1]; Return on Assets (ROA) [income before extraordinary items in year t divided by total
assets at the end of fiscal year t–1]; Leverage [total liabilities to total assets]; CAPX (Capital Spending Intensity) [capital spending in year t–1 divided by
total sales revenues in year t–1]; Plant newness (Newness) [the net properties, plant and equipment at the end of fiscal year t–1 divided by the gross
properties, plant and equipment at the end of fiscal year t–1]; and Tobin's Q (MVE + PS + DEBT)/TA [(product of a firm's share price and the number of
common stock shares outstanding + the liquidating value of the firm's outstanding preferred stock + value of the firm's short-term liabilities net of its
short-term assets, plus the firm's long-term debt)/book value of the total assets), all at the end of fiscal year t–1].

report higher CSR scores (Darnall et al., 2010), highly leveraged firms sample period, we eliminate observations in years 2008–2009 (which
with large capital expenditures exhibit lower CSR performance. correspond to a financial crisis) from the sample and find that our
results remained consistent with those in Table 4 (results not tabulated).
Second, we investigate the relationship between personality traits
4.1 | Additional tests and environmental and social performance by refining the CSR envi-
ronmental dimension by the three categories of product innovation
We perform a number of additional analyses in order to gain further (CSR-E1), resource consumption (CSR-E2), and emissions reduction
insights from the results and ensure their robustness. First, to ensure (CSR-E3) and the CSR social dimension by the four categories related
that the results are not sensitive to economic turbulence during our to community (CSR-S1), human rights (CSR-S2), workforce (CSR-S3),
 1572

TABLE 3 Correlations

Variables [1] [2] [3] [4] [5] [6] [7] [8] [9] [10] [11] [12] [13] [14] [15] [16] [17] [18] [19] [20]
CSR-ES [1] 1.00
CSR-E [2] 0.95 1.00
CSR-S [3] 0.90 0.72 1.00
CEO-O [4] 0.03 0.00 0.06 1.00
CEO-C [5] 0.11 0.10 0.10 −0.15 1.00
CEO-E [6] 0.13 0.11 0.13 0.25 0.21 1.00
CEO-A [7] 0.04 0.02 0.06 −0.22 0.46 0.07 1.00
CEO-N [8] 0.02 0.03 0.00 −0.20 0.61 0.29 0.06 1.00
CSR-Com [9] 0.63 0.63 0.52 0.00 0.05 0.06 0.04 0.02 1.00
Independence [10] 0.26 0.25 0.23 −0.02 0.03 0.01 0.05 −0.03 0.24 1.00
Duality [11] 0.08 0.07 0.08 −0.01 0.03 −0.05 0.07 −0.02 0.06 0.19 1.00
Age [12] 0.11 0.12 0.07 −0.06 0.07 −0.08 0.07 0.03 0.10 0.08 0.19 1.00
Gender [13] 0.10 0.10 0.09 −0.05 0.12 0.10 0.11 0.04 0.02 0.06 0.02 −0.01 1.00
Tenure [14] −0.08 −0.08 −0.06 0.04 −0.13 −0.05 −0.09 −0.07 −0.07 0.02 0.19 0.32 −0.09 1.00
Size [15] 0.41 0.38 0.38 −0.09 0.11 0.04 0.16 0.06 0.31 0.22 0.17 0.14 0.09 −0.05 1.00
ROA [16] 0.07 0.07 0.06 0.08 0.02 0.00 −0.05 −0.10 0.00 −0.05 −0.04 0.00 −0.02 0.00 −0.39 1.00
Leverage [17] 0.09 0.05 0.12 −0.08 0.12 0.06 0.12 0.13 0.11 0.18 0.16 0.04 0.06 −0.06 0.32 −0.28 1.00
CAPX [18] 0.09 0.12 0.03 −0.06 0.10 −0.07 0.00 0.11 0.11 0.03 0.01 0.06 0.01 −0.05 0.13 −0.04 −0.02 1.00
Newness [19] 0.06 0.05 0.06 0.06 −0.04 0.07 −0.08 −0.07 0.07 0.15 0.04 −0.01 0.00 0.02 −0.09 0.12 0.08 −0.19 1.00
Tobin's Q [20] −0.02 −0.02 −0.01 0.11 −0.04 0.04 −0.09 −0.10 −0.10 −0.09 −0.05 −0.04 0.02 0.06 −0.45 0.63 −0.27 0.02 0.02 1.00

Note: Spearman correlations that are significant at 5% levels are in bold. All variables are defined in Table 2.
HRAZDIL ET AL.

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HRAZDIL ET AL. 1573

TABLE 4 CSR dimension regressions

CSR-ES CSR-E CSR-S

Variables Model 1 Model 2 Model 3 Model 4 Model 5 Model 6

Constant 49.53*** −52.36*** 49.17*** −62.99*** 49.17*** −31.24***
(5.80) (−6.72) (4.61) (−6.23) (4.61) (−3.91)
CEO-E 0.17*** 0.10*** 0.20*** 0.10*** 0.15*** 0.08***
(7.21) (5.45) (6.66) (4.63) (6.60) (4.68)
CEO-O −0.14* −0.06 −0.22** −0.13* −0.05 0.01
(−1.91) (−1.15) (−2.46) (−1.98) (−0.77) (0.22)
CEO-C 0.16*** 0.11*** 0.15*** 0.10** 0.17*** 0.13***
(3.61) (3.48) (2.66) (2.56) (4.27) (4.01)
CEO-A −0.04 −0.10*** −0.03 −0.11*** −0.04 −0.09***
(−1.04) (−3.93) (−0.73) (−3.14) (−1.24) (−3.41)
CEO-N −0.22*** −0.15*** −0.19** −0.12** −0.26*** −0.22***
(−3.50) (−3.29) (−2.39) (−2.01) (−4.40) (−4.27)
CSR-Com 20.67*** 25.84*** 15.07***
(32.17) (31.2) (22.86)
Independence 0.23*** 0.25*** 0.21***
(7.80) (6.40) (6.85)
Duality −0.05 −0.55 0.50
(−0.09) (−0.73) (0.81)
Age 0.00 0.07 −0.08
(0.08) (1.01) (−1.37)
Gender 2.71* 4.13** 1.69
(1.76) (2.09) (1.07)
Tenure −0.00 0.02 −0.01
(−0.03) (0.33) (−0.13)
Size 7.45*** 8.51*** 6.22***
(24.06) (21.51) (19.58)
ROA 0.41*** 0.42*** 0.45***
(5.05) (4.05) (5.38)
Leverage −4.64*** −9.69*** −0.66
(−3.03) (−4.93) (−0.42)
CAPX −0.12*** −0.08** −0.14***
(−4.19) (−2.19) (−4.65)
Newness 0.94*** −0.97*** 0.84**
(2.84) (−3.29) (2.48)
Tobin's Q 0.10 0.12 −0.15
(0.34) (0.32) (−0.49)
Observations 2949 2949 2949 2949 2949 2949
Industry FE Yes Yes Yes Yes Yes Yes
Year FE Yes Yes Yes Yes Yes Yes
Adjusted R2 0.19 0.59 0.20 0.57 0.16 0.47

Note: This table presents regression models for Equation (1) separately for Big Five personality traits without control variables and with control variables,
respectively. The dependent variables are CSR-ES in models 1 and 2, CSR-E in models 3 and 4, and CSR-S in models 5 and 6, respectively. All variables are
defined in Table 2. In brackets are the t values of the regression coefficients; ***, **, and * denote 1%, 5%, and 10% significant levels, respectively.

and product responsibility (CSR-S4). Our findings in Table 5 reveal models 1 and 2, respectively), to community (positive coefficient on
that extraversion remains significantly and positively associated with CEO-C and negative coefficient on CEO-N in model 4), and to work-
all environmental and social subcategories, thus providing further sup- force and product responsibility (negative coefficients on CEO-A and
port for our hypothesis. The remaining Big Five traits are significant CEO-N in models 6 and 7, respectively).
determinants of CSR performance related to product innovation and Finally, consistent with Mahmoudian et al. (2020), we classify
resource consumption (negative coefficients on CEO-O and CEO-A in Agriculture, Forestry, Fishing & Hunting, Mining, Quarrying, and Oil &
 15353966, 2021, 6, Downloaded from https://onlinelibrary.wiley.com/doi/10.1002/csr.2116, Wiley Online Library on [03/07/2024]. See the Terms and Conditions (https://onlinelibrary.wiley.com/terms-and-conditions) on Wiley Online Library for rules of use; OA articles are governed by the applicable Creative Commons License
1574 HRAZDIL ET AL.

TABLE 5 CSR categories regressions

Model 1 Model 2 Model 3 Model 4 Model 5 Model 6 Model 7

Variables CSR-E1 CSR-E2 CSR-E3 CSR-S1 CSR-S2 CSR-S3 CSR-S4
Constant −49.03*** −57.45*** −52.36*** 3.17 −64.39*** −36.13*** −27.60**
(−3.29) (−4.70) (−6.72) (0.36) (−4.64) (−3.56) (−2.12)
CEO-E 0.15*** 0.11*** 0.09*** 0.06*** 0.05* 0.06** 0.15***
(4.50) (4.11) (3.45) (2.87) (1.75) (2.56) (4.94)
CEO-O −0.35*** −0.17** −0.01 0.06 −0.06 0.10 −0.12
(−3.64) (−2.10) (−0.12) (1.03) (−0.62) (1.54) (−1.40)
CEO-C 0.05 0.11** 0.03 0.13*** 0.02 0.19*** 0.08
(0.76) (2.28) (0.73) (3.48) (0.30) (4.52) (1.57)
CEO-A −0.15*** −0.13*** −0.07* −0.02 −0.08* −0.10*** −0.13***
(−3.06) (−3.13) (−1.78) (−0.77) (−1.75) (−2.88) (−2.88)
CEO-N 0.01 −0.09 −0.08 −0.12** 0.04 −0.32*** −0.24***
(0.09) (−1.23) (−1.19) (−2.40) (0.48) (−5.27) (−3.14)
Control variables Yes Yes Yes Yes Yes Yes Yes
Observations 2949 2949 2949 2949 2949 2949 2949
Industry FE Yes Yes Yes Yes Yes Yes Yes
Year FE Yes Yes Yes Yes Yes Yes Yes
Adjusted R2 0.27 0.54 0.57 0.33 0.41 0.40 0.29

Note: This table presents regression models for Equation (1) separately for Big Five personality traits (OCEAN) with control variables. The dependent
variables are sub-categories of CSR-E and CSR-S. CSR-E categories include three categories of product innovation (CSR-E1), resource consumption (CSR-
E2), and emissions reduction (CSR-E3) in models 1–3, respectively. CSR-S categories include four categories of community (CSR-S1), human rights (CSR-
S2), workforce (CSR-S3), and product responsibility (CSR-S4) in models 4–7, respectively. All variables are defined in Table 2. In brackets are the t values of
the regression coefficients. ***, **, and * denote 1%, 5%, and 10% significant levels, respectively.

TABLE 6 CSR regressions with environmental sensitive industries

Model 1 Model 2 Model 3

Variables CSR-ES CSR-E CSR-S
Constant −33.41** −39.48** −36.13***
(−2.79) (−2.69) (−3.56)
CEO-E 0.14*** 0.14*** 0.13***
(5.05) (4.27) (4.57)
CEO-O −0.14* −0.23** −0.05
(−1.82) (−2.42) (−0.60)
CEO-C 0.07 0.04 0.11**
(1.57) (0.68) (2.17)
CEO-A −0.11** −0.11** −0.11**
(−2.73) (−2.29) (−2.51)
CEO-N −0.14** −0.12 −0.17**
(−2.06) (−1.40) (−2.29)
Control variables Yes Yes Yes
Observations 1633 1633 1633
Industry FE Yes Yes Yes
Year FE Yes Yes Yes
2
Adjusted R 0.49 0.45 0.40

Note: This table presents regression models for Equation (1) using environmental sensitive industries separately for Big Five personality traits with control
variables. The dependent variables are CSR-ES (environmental and social) CSR-E (environmental) and CSR-S (social) in models 1–3, respectively. All
variables are defined in Table 2. In brackets are the t values of the regression coefficients. ***, **, and * denote 1%, 5%, and 10% significant levels,
respectively.
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HRAZDIL ET AL. 1575

Gas Extraction, Utilities, Construction, and Manufacturing as indus- conscientiousness, agreeableness, and neuroticism) relate to CSR are
tries with a high environmental impact, whereas Wholesale Trade, scarce, we call for further research explore this area.
Retail Trade, Transportation & Warehousing, Information, Finance &
Insurance, Real Estate, Rental & Leasing, Professional, Scientific & ACKNOWLEDG MENTS
Technical Services, Administrative, Support & Waste, Health Care & We thank Valérie Swaen, Ray Zhang, Rafael Rogo, Peter Clarkson,
Social Assistance, and Accommodation & Food Services as industries Irene Gordon, Irene Herremans, and conference participants at the
with a lower environmental impact. Table 6 shows the results when American Accounting Association, the Canadian Academic Accounting
limiting industries to environmentally sensitive ones where firms are Association, and the World Finance Association for their helpful com-
under more pressure to address social and environmental issues ments and suggestions. This work was supported by the [Social Sci-
related to their operations.10 The results for environmentally sensitive ences and Humanities Research Council of Canada] under Grant
industries provide additional support for our hypothesis that extra- [grant number 31-R640084]. Any errors are ours.
verted CEOs play a key role in CSR performance.

OR CID
Karel Hrazdil https://orcid.org/0000-0001-8678-8596
5 | C O N CL U S I O N
Fereshteh Mahmoudian https://orcid.org/0000-0002-4160-7568
Jamal A. Nazari https://orcid.org/0000-0001-6789-8482
The key contribution of our article is the use of a validated methodol-
ogy, based on recent developments in computing and artificial intelli-
ENDNOTES
gence, to measure extraversion and other Big Five personality traits
1
The Big Five, also known as the five-factor model developed by Nor-
(openness, conscientiousness, agreeableness, and neuroticism); we
man (1963) and McCrae and Costa (1997), is one of the best studied
apply this methodology to the analysis of how executive personality is and the most widely used personality models to describe how individ-
reflected in firm CSR performance. We measure the Big Five person- uals generally engage with the world.
ality traits for a sample of CEOs of S&P 500 companies during the 2
https://www.globalreporting.org/
period 2008–2016 and find that firms led by highly extraverted CEOs 3
https://www.ibm.com/watson/services/personality-insights/
experience significantly higher CSR performance (both environmental 4
The stakeholder theory shares the same view as the upper echelons
and social), even after controlling for other personality traits and man- perspective in that firms' strategic decisions, including CSR policies,
agerial and firm-specific characteristics. are significantly influenced by corporate executives (Chin
et al., 2013).
To the best of our knowledge, this study is among the first to uti-
5
We acknowledge that there are other theories that help explain the dif-
lise the IBM Watson Personality Insights service to measure the Big
ferences in individual value orientations towards the environment. For
Five personality traits and test upper echelons theory in the CSR set- example, according to the Value Belief Norm theory (Stern, 2000), norms
ting. Our research findings thus respond to the call by Plöckinger and personal values are antecedents of pro-environmental beliefs. Value
et al. (2016) for the continued development and validation of mean- orientations determine how individuals perceive the negative impacts of
environmental issues for themselves (egoistic), others (altruistic), and the
ingful measures of management personality to support the further
biosphere (biospheric). Individuals with more altruistic and biospheric
study of upper echelon theory in accounting. We hope that our find- concerns tend to have more environmentally responsible attitudes than
ings not only stimulate future research on upper echelons, stakeholder those with egocentric concerns (Hirsh & Dolderman, 2007).
theory and CSR literature, but also novel methodological approaches 6
In our study, we do not attempt to examine CSR in connection with
to measure executive personalities. The implications of our findings firm performance since our primary focus is on the determinants of
are consistent with Hambrick and Mason (1984), who suggest that CSR performance from the personality perspective. First, the impact of
CSR activities on firm financial performance is unknown. There are two
human resources executives should be more involved and consider
competing views on whether CSR affects shareholder value, where the
inherent personality characteristics when selecting management to existing empirical evidence is largely inconclusive (Margolis &
make sure that they are properly aligned with organisational values. Walsh, 2003). The authors suggest that previous studies are subject to
Our results suggest that firms with environmental and social engage- various imperfections including measurement problems related to both
CSR and financial performance, a lack of necessary analyses of causality
ment visions should appoint extroverted CEOs with greater assertive
and/or endogeneity, omitted variable problems, a lack of methodologi-
behaviour, decisive thinking, and desire for social engagement. Such cal rigour, and a lack of theoretical grounding.
CEOs should further be more conscious, less agreeable and less 7
For further details how the software works, please refer to Hrazdil
neurotic. et al. (2020) and https://cloud.ibm.com/docs/personality-insights?
We encourage future research to consider the role of personality topic=personality-insights-science
8
in issues relevant to designing corporate governance boards, manag- In sensitivity tests, we find that all Big Five personality traits based on
highly standardised formal presentations by CEOs are significantly more
ing ethical behaviour, and improving the quality of financial reporting.
homogenous and display significantly lower variation in results (results
Understanding how the personality traits of managers affect their not tabulated).
decision-making should be of interest to a variety of stakeholders 9
Consistent with prior literature, we only investigate CSR along the Envi-
who evaluate corporate actions and outcomes. As the theories on ronmental and Social dimensions (Kim et al., 2012). Our results are
how the remaining Big Five personality traits (openness, almost identical if we include the score as part of CSR performance.
 15353966, 2021, 6, Downloaded from https://onlinelibrary.wiley.com/doi/10.1002/csr.2116, Wiley Online Library on [03/07/2024]. See the Terms and Conditions (https://onlinelibrary.wiley.com/terms-and-conditions) on Wiley Online Library for rules of use; OA articles are governed by the applicable Creative Commons License
1576 HRAZDIL ET AL.

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