The attached study by Adebambo et al found that companies run by charismatic CEO's tend to have higher implied cost of equity. By implication, this suggests that equity investors assign higher relative risk and, as a consequence, higher equity risk premium to companies run by "charismatic CEO's."
What do you think?
https://www.wsj.com/articles/the-downside-of-extroverted-ceos-11565575441?shareToken=sta0bfae6009704973a5ced66d6182fcbb
The following paper talks about such relationship between charismatic CEOs and cost of capital. You may want to check it out.
The state of US corporate governance: What's right and what's wrong?
B Holmstrom, SN Kaplan - Journal of Applied Corporate …, 2003 - Wiley Online Library
Prof-Dr-Ahmed Al-Baidhani أ. د. احمد البيضاني
Thank you for sharing. Although the primary aim of the piece seems to be largely focused on the broader American "corporate governance" impact on TSR compared to other markets over a period of time, it is an insightful piece. The key take out for me is "you get what you incentivise."
I would recommend reading the following article which you may find through Ebscohost Database:
Hayibor, Sefa; Agle, Bradley; Sears, Greg; Sonnenfeld, Jeffrey and Ward, Andrew (2011) Value Congruence and Charismatic Leadership in CEO-Top Manager Relationships: An Empirical Investigation, Journal of Business Ethics, Vol. 102, Issue 2, pp. 237-254.
Mahfuz Judeh
Thank you for sharing. I will digest the study.
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