Do CEO Behavior Biases and Personal Traits Influence ESG Performance? The Evidence from Emerging Capital Market of Russia

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Abstract

The impact of behavioral biases and personal traits of the CEO on corporate decisions and performance has become the important agenda for management, governance and finance research. But still the empirical evidence on the influence of behavioral biases on the implementation of sustainability principles into company’s strategies is missing not only in
emerging markets, but for developed markets as well. We aim to fulfill this gap by findings on the role of behavioral characteristics of a CEO and how they affect the effectiveness of the ESG (Environmental, Social and Corporate Governance) approach to company management in one of the largest emerging capital market of Russia. We first focus on CEO’s optimism,
narcissism, self-confidence, and the lack of confidence of the CEO and their impact over ESG performance. To identify behavioral biases, we use textual analysis and the “bag of words” method applied to the written letters to the shareholders by CEOs of Russian companies in 2017–2019 on a sample of 38 companies with official external ESG ratings.


Our results confirm a significant influence of optimism and narcissism on the effectiveness of the ESG approach, but self-confidence does not appear to be statistically significant. Moreover, our findings prove significance of some personal traits such as industry experience and technical educational background. Our findings validate and complement prior research on personal characteristics of CEOs and provide novel data on the impact on ESG in emerging capital markets.

About the authors

E. Lazareva

Author for correspondence.
Email: Dmitrievskaya.ekaterina@gmail.com

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