This study investigates the impact of top executives' attributes on firm performance through strategic choices in capital structure and investments, comparing large firms with SMEs. Using a large dataset of Japanese firms, the study identifies nine key executive attributes (including the Big Five personality traits) and applies structural equation modeling. Results show stronger linkages between executive attributes and strategic choices in SMEs, where conscientiousness, decisiveness, and financial prudence correlate with conservative strategies, while neuroticism, openness, and agreeableness correlate with riskier, innovative strategies. In contrast, these relationships are weaker in large firms. The study highlights the mediating role of strategic choices (particularly financial leverage) in the relationship between executive attributes and firm performance, with inconsistent mediation explaining previously observed low performance effects in Japanese firms.

Jun Xie, Wataru Nozawa, Shunsuke Managi