CEO Constellation, Capital Structure, and Financial Performance

Abstract

Distinctive from prior research that emphasizes the influences of CEO demographic characteristics on corporate financial strategies, this study uses constellation as the proxy variables for CEO psychological traits and takes into consideration demographic characteristic variables to further analyze the relationship between CEO traits and corporate financial leverage, performance, and growth opportunity. This is an interesting issue worthy of study because shareholders and potential investors are always searching for CEOs that can create and increase values for the firms. The results show that there is a greater proportion of Leo CEOs in high-leverage firms, a greater proportion of Virgo CEOs in low-leverage and high-ROA firms, and a greater proportion of Pisces CEOs in both low- and high-MB-ratio firms. In addition, the CEOs with air-constellation are positively related to ROA. In general, fire-sign and earth-sign CEOs prefer high financial leverage, while air-sign CEOs are averse to such; fire-sign and air-sign CEOs have positive influences on firm profitability, while earth-sign CEOs have negative influences. Moreover, cash compensation will reduce the positive effect of air-sign CEOs on ROA.