CEO early‐life disaster experience and corporate social performance

Abstract

Research Summary Despite an extensive upper echelons literature on how CEOs' prior experiences influence firm behavior, we know little about the influence of traumatic experiences early in CEOs' lives. Drawing on post‐traumatic growth theory, we describe how traumatic experiences early in CEOs' lives influence corporate social performance. Our theory points to the asymmetric impact of CEO early‐life trauma on responsible and irresponsible corporate social performance and to two boundary conditions: CEO age at the time of the traumatic event and the severity of the event. We develop and test our arguments in the context of large‐scale disasters experienced early in the CEO's life. Our findings advance strategic management research on the relationship between CEO experiences and firm outcomes. Managerial Summary We consider how traumatic experiences in childhood shape CEO cognition and values and, therefore, firm behavior. Our findings suggest that CEOs who have had to deal with traumatic early‐life events may gain psychological strength from such experiences and that their psychological growth informs firm conduct. Specifically, our findings indicate that experience of trauma early in the CEO's life is positively associated with corporate social performance. The implication is that boards aspiring to enhance this aspect of corporate performance may wish to consider the early‐life experiences of prospective CEOs. While early‐life experiences are unlikely to feature on a prospective CEO's résumé, the typical selection process for senior executive appointments is well placed to unearth executives' life histories.

Burden or Blessing? CEO Early-Life Adversity Experience and Firm Internationalization Performance

“…Although the sent-down experience has its specific historical context, and may not replicate elsewhere, this particular experience is possibly generalizable to any hardship experienced by adolescents that are out of their control. Thus, our study may help understand the role that such adversities, experienced by senior executives, play in firm internationalization, which adds to the research on CEO early-life in echoing the call from O’Sullivan and Zolotoy (2021) .…”

“…Studies in developmental psychology demonstrate that imprints from early-life experiences can be formative and enduring and manifest in various subsequent decisions ( Caspi et al, 2005 ). Prior studies in management literature have investigated the role of CEO early-life poverty ( Xu and Li, 2016 ), early-life disaster experience ( O’Sullivan and Zolotoy, 2021 ) on firm strategies such as CSR and innovation, yet little is known about the impact of CEO early-life adversity instigated by social disorder. Using the send-down movement in china as the context of individual adversity, we analyze how CEO early-life adversity experience might affect their tolerance of uncertainty and change self-efficacy and then influence firm internationalization performance, enriching the stream of research on how senior executives’ early-life experiences influence firm strategies and outcomes.…”

“… Malmendier and Nagel (2009) find that CEOs who lived through the Great Recession tend to maintain robust capital structure with less leverage, and those who started their careers during the recession have similar risk preferences. O’Sullivan and Zolotoy (2021) argue and test the positive effect of CEO early-life disaster experience on corporate social performance through the theoretical lens of post-traumatic growth. Xu and Li (2016) find that firms led by CEOs born in poverty counties during “the Great Famine” made more charitable donations.…”

Executive poverty experience and innovation performance: A study of moderating effects and influencing mechanism

“…Research has demonstrated that childhood experiences contribute to the development of an individual’s character and will continue to influence moral judgment and value orientation. Early life experiences of poverty have a stronger impact on a CEO and are more likely to develop a sense of social responsibility and morality, such as greater compassion ( Malmendier et al, 2011 ) and an increased sense of responsibility ( O’Sullivan et al, 2021 ; Xu and Ma, 2021 ). According to Feng and Johansson (2018) , CEOs who experienced the Great Chinese Famine in their youth were less likely to commit fraud and showed higher levels of ethics ( Feng and Johansson, 2018 ).…”

“…Early life experiences of poverty can influence executives’ cognitive structure, decision-making preferences, value orientations, and so on ( Holman and Silver, 1998 ; Pandya, 2020 ; O’Sullivan et al, 2021 ). This influence is “imprinted” as cognitive habits and behavioral characteristics, persistent in the subconscious of executives and reflected in their decisions ( Marquis and Tilcsik, 2013 ).…”