The nexus of top executives' attributes, firm strategies, and outcomes: Large firms versus SMEs

Based on a unique and extensive dataset of top executives, this study explores the effect of top executives' attributes on firm performance through strategic choices for capital structure and investments. The big five personalities and top executives' other four essential personal attributes are identified from over 970,000 observations in Japanese firms. We applied structural equational modeling to test the hypothesized mediation models and the differences across large, medium, and small-sized firms. The results show that top executives in small and medium-sized enterprises (SMEs) present stronger linkages with strategic choices, significantly mediating the relationship between top executives' attributes and firm performance. Specifically, top executives with higher conscientiousness, decisiveness, and financial prudence tend to choose conservative strategies, while those with higher neuroticism, openness, and agreeableness tend to adopt risky and innovative strategies. In contrast, top executives' attributes can hardly predict firm strategies and outcomes for large firms, and neither fails to predict firm outcomes in SMEs given the inconsistent mediation.