MODERATING ROLE OF CEO TENURE
Master Thesis, MSc. Human Resource Management
University of Groningen, Faculty of Economics and Business
ABSTRACT
The present research aimed to show that changes in company performance are important antecedents of CEOs’ positive and negative emotion expressions, as found in CEOs’ letters to the shareholders; and that this relationship is stronger for CEOs with low tenure than for CEOs with high tenure. The results did not support this predication in total; however, it was possible to show that the interaction of changes in company performance and CEO tenure could be a possible antecedent of negative emotion expressions. Unexpectedly, however, the role of company performance was more pronounced for CEOs with high rather than low tenure.
INTRODUCTION
Positive and negative emotions are an integral and inseparable part of daily organizational life (Ashforth & Humphrey, 1995) and have received growing attention from organizational behavior researchers in the recent years (Bono & Illies, 2006; Domagalski, 1999; Kangasharju & Nikko, 2009). Emotions are often described, in psychological terms, as intrapersonal, individualized responses to some external stimulus (Domagalski, 1999). According to Lazarus (1991), emotions can either result from harm, loss, and threat or result from benefit. Negative emotions are emotions like fear, guilt, and shame which are resulting from harm or threat. Positive emotions, on the contrary, result from benefits and include emotions like joy, pride, and happiness (Lazarus, 1991).
determine the outcomes and external forces can overwhelm a leader’s intentions and effort (Kaiser et al., 2008). Leaders, therefore, attempt to create the impression that they are competent, important, and in control of the events (Yukl, 2013). Particularly, it was found that CEOs influence the impressions of external stakeholders whose confidence and support are important to the success and survival of the organization (Yukl, 2013). Positive and negative emotions are therefore used to influence followers’ and other stakeholders’ emotional states and motivational levels (Lewis, 2000).
Empirical research in the field of emotions in leadership is complex, and most research focuses on the importance and the effects of emotions on the relationship between leader and follower (e.g. Dasborough & Ashanasy, 2002; Walter et al., 2011; Yukl, 2013). However, despite the importance of emotion expressions for leadership outcomes, only a limited body of research can be found that explains the antecedents of leaders’ emotion expressions. From a theoretical point of view, antecedents of emotions were found by various researchers to be related to how individuals evaluate the relevance of events (Kiefer, 2005). Previous theorizing in the field of emotions, like the Appraisal Theory of Lazarus (1991) and the Affective Events Theory of Weiss and Cropanzano (1996), suggest, in particular, that external stimuli and events critically shape an individual’s emotion expression. For top-level leaders like CEOs, changes in company performance (like increasing or decreasing revenues) could be particularly important affective events, which could be perceived as beneficial or harmful to the position or public perception of the CEO.
expressions among CEOs, because these top-level leaders may be particularly influential for company performance outcomes.
Importantly, I expect the relationship between changes in company performance and CEOs’ positive and negative emotion expressions to be contingent on an important moderating factor. Research suggests, specifically, that high-level leaders’ career-goals and orientations change with their positional tenure (i.e., the number of years the CEO occupies his or her position). Particularly, a CEOs’ engagement concerning his or her position may diminish with increasing tenure (Hambrick & Fukutomi, 1991). Hence, I expect leaders’ positional tenure to moderate the relationship between changes in company performance and CEOs’ emotion expressions. On the one hand, I expect that with increasing (decreasing) company performance an increased number of positive (negative) emotion expressions will be found. On the other hand, I presume that these relationships between company performance and CEO emotion expression will be moderated by positional tenure of the CEO (see Figure 1).
In doing so, this research strives to contribute to the leadership literature in various ways. First, the research offers additional insight into possible antecedents of leader’s emotion expressions – a topic that has largely been neglected in previous work; despite the relevance of emotion expressions for processes of leadership (cf. Walter et al., 2011). Second, it will contribute to the leadership literature by representing novel discoveries concerning the relationship of changes in company performance, CEO tenure and emotion expression. Third, the findings will offer additional information about the different factors influencing the appraisal process, which can be used in future research to analyze the appraisal process in detail.
With its findings, this research can establish a foundation for future work from several research branches. Future research in emotions and leadership can work with these findings to further analyze leaders’ emotions and the effect of these emotions on followers or shareholders. Research specialized in finance and accounting or financial analyst can use this research to further analyze, for example, the expressiveness of shareholder letters or the effects of changes in company performance on the CEOs’ articulation and rhetoric.
--- Insert Figure 1 here ---
THEORY AND HYPOTHESES
Positive and Negative Emotions
resources which are reactions to external stimuli. He specifies that appraisal is a key factor in the evolution of emotions. According to Lazarus (1991), emotions are triggered by a two-stage process of primary and secondary appraisal. Primary appraisal defines the positive and negative significance of the event and secondary appraisal concerns the ability of coping with the consequences of an event (Scherer, 1999). The appraisal process results in different categories of emotions; with harms, losses, and threats, triggering negative emotions, and benefits triggering positive emotions (Lazarus, 1991). Subsequently, these emotions evoke specific physiological responses, vocal and facial expressions (Scherer, 1999).
The common thread between these two theories is that the evaluation, interpretation, and appraisal of an event, rather than the event itself, determines one’s emotional experiences and expressions (Basch & Fischer, 1998). Based on this, Basch and Fischer (1998) defined an affective event as an incident that stimulates the appraisal of an emotional reaction to an object or occurrence.
Hence, the theoretical framework of this research is built upon the different approaches of Appraisal Theories and the Affective Events Theory.
Changes in Company Performance and CEOs’ Positive Emotion Expressions
increase firm performance should receive compensation for their high level of effort, for instance larger salary, larger bonuses, and more stock options.
Hence, changes in company performance should be important emotion triggers (Ekman, 1999; Lazarus, 1991; Weiss & Cropanzano, 1996). Increased company performance, in particular, should be appraised as a beneficial event. Increased company performance will result in positive consequences for the CEO, because it confirms the CEOs’ work and actions. As a result, the CEOs’ bonus and incentives could increase. Further, future expectations for the CEO and his or her organization and shareholders will be favorable due to positive company results, which could ensure the CEOs’ position (Wowak et al., 2011).
In conclusion, increased performance is likely to be appraised as a beneficial event by the CEO, because the CEO will benefit from the positive performance results. Thus the emergence of positive emotion will be stimulated in this process (Rajah et al., 2011). Hence, positive emotion should result in increased positive emotion expressions in a CEOs’ shareholder letter, and I therefore hypothesize:
Hypothesis 1. Increased company performance will be positively related to positive emotion expressions in CEOs’ letters to the shareholders.
Changes in Company Performance and CEOs’ Negative Emotion Expressions
hierarchical position. If a company is performing poorer compared to past years, its board and shareholder could shift the focus from contemplating a pay adjustment to consider dismissing the CEO (Wowak et al., 2011).
In conclusion, decreased company performance is likely to be appraised as a threat because there is a lot at stake for the CEO. As a result, this particular type of event is likely to stimulate negative emotions, which may be signaled by increased negative emotion expressions in CEOs’ shareholder letters. Therefore, I hypothesize:
Hypothesis 2. Decreased company performance will be positively related to negative emotion expressions in CEOs’ letters to the shareholders
The Moderating Role of CEO Tenure
the specific knowledge and skills necessary for the job, building a network, and taking charge is barely possible in that time frame (Walters et al, 2007).
Once the CEO has passed this critical phase, his or her position power is typically enhanced and solidified (Hambrick & Fukutomi, 1991). With increasing tenure, the CEO is able to build, strengthen and integrate him- or herself into the networks of key stakeholders (Simsek, 2007). Further, the CEO has established resources that give him or her support for strategic decisions and risky initiatives (Simsek, 2007).
However, according to literature, it seems that the behavior of CEOs becomes more complex with increased tenure. It was found that at a certain point, despite a well-established position and despite high levels of power and knowledge, CEOs start to psychologically disengage from their position (Hambrick and Fukutomi, 1991). Disengaged CEOs are suggested to have diminished task interest, and the openness and responsiveness from the early tenure stages are depleted (Hambrick & Fukutomi, 1991). Kahn (1990) defined disengagement as a process in which a person decouples him- or herself from their role, becomes physically uninvolved in tasks, cognitively unvigilant, and emotionally disconnected from others. In this process, people often come to hide their true identity, thoughts and feelings; this self-defense is referred to as defensive, impersonal or emotionally unexpressive, bureaucratic and self-estranged behavior (Kahn, 1990).
Furthermore, based on Hambrick and Fukutomi (1991) findings, Simsek (2007) suggest that CEOs become committed to their paradigm, avoid information, and ignore the necessity for change. In addition, Simsek (2007) argues that long-tenured CEOs are committed to the status quo because of inferior adaptive aspirations.
lower tenure will appraise external stimuli, like changes in company performance, as more relevant than more experienced CEOs. A positive change in company performance in the early stages would be appraised as even more beneficial for a new CEO, because it helps him or her to establish creditability, legitimacy and political foothold (Hambrick & Fukutomi, 1991). Decreasing company performance, on the other hand, could be appraised as particularly harmful because it could endanger the CEOs’ position and prevent the effective development of creditability and legitimacy.
With increasing tenure, the risk of termination decreases, because CEOs overcome the high level of uncertainty by gaining power and legitimacy, which assures their position. However, due to gained job security and disengagement, firm performance may lose some of its relevance and significance for CEOs. Contrary to CEOs in early tenure stages, I therefore assume that CEOs with higher tenure appraise positive changes in company performance as less relevant for themselves. Increasing company performance, in particular, might be experienced as less beneficial, because the CEO might not benefit from this success in the future. Similarly, decreasing company performance might be experienced as less harmful, because the CEO has less to loose from such development. In addition, due to the disengagement in the late tenure stages (Hambrick & Fukutomi, 1991), CEOs are also less emotional reactive, then, as compared with CEOs in earlier tenure stages. All in all, I expect that higher CEO tenure will mitigate their positive and negative emotion expressions in response to changes in company performance. Therefore, I suggest:
Hypothesis 3. The relationship between positive changes in company performance and positive emotion expression in the CEOs’ shareholder letter will be moderated by CEO tenure. This positive relationship will be more pronounced for CEOs with lower tenure rather
Hypothesis 4. The relationship between negative changes in company performance and negative emotion expression in the CEOs’ shareholder letter will be moderated by CEO tenure. This positive relationship will be more pronounced for CEOs with lower tenure rather
than higher tenure.
METHOD
For this research, a sample of the first 150 companies of the 2011 CNN Fortune 500 list was drawn (CNN, 2011). These 150 companies belong to the largest publicly traded American companies of the year 2011. Incompatible or missing data reduced the actual sample size to 110 companies and CEOs. From these 110 companies, the annual report’s shareholder letter, financial information, and demographic data from the Chief Executive Officers or Managing Directors (i.e., the person who signed the shareholder letter) could be gathered. Research suggests that CEOs’ letters to the shareholders have enormous rhetorical importance because they communicate the writer’s personality and credibility to the reader (Hyland, 1998). Furthermore, shareholder letters were found to feature strong personal self-attribution and are indicative of the CEOs’ leadership mindset and of the espoused vision, strategy and ideology of the CEO (Craig & Amernic, 2011). The companies in the present sample belong to various industries (29 Heavy Industry; 20 Light Industry; 15 Services; 26 Finance and Insurance; 21 Retail and Wholesale) and generated revenues between $486.854 and $423 Million in 2011. The CEOs of those companies were primarily male (102 male; 8 female) and were on average 57 years old, with more than 7 years of average tenure in their current position.
changes from 2010 to 2011 could be calculated. The CEOs’ shareholder letters were extracted from the companies’ 2011 annual reports, which were published on the homepages of the different companies. Financial and demographic data were gathered from the 10-K-Form of the annual reports submitted at the SEC, which are publicly accessible (SEC, 2013).
To collect the data for the dependent variables (positive and negative emotion expression), the shareholder letters were analyzed with the well-validated Linguistic Inquiry and Word Count (LIWC) text analysis program (Liwc.net, 2013). LIWC is a “computerized text analysis program that categorizes and quantifies language use. The LIWC counts the frequency of words in a given category”, including standard language categories and psychological processes like emotion, cognitive, sensory and social processes (Kahn, Tobin, Massey & Anderson, 2007, p, 264). According to Kahn et al. (2007), the LIWC is a useful means of measuring verbal emotion expressions and has proven its validity to handle the context of emotional expressions.
Before the analysis, the shareholder letters were converted into MS-word files and carefully adapted for LIWC use, following the guidelines suggested by Tausczik and Pennebaker (2010).
Measures
Positive and Negative Emotion Expressions. CEOs’ verbal expressions of emotions in
their shareholder letters were measured with the LIWC (Kahn et al., 2007). The software categorized the respective emotion expressions into 5 categories: positive emotions, negative emotions, anxiety, anger, and sadness. The number of used expression per shareholder letter was expressed in percentage terms. Over the last years, the usage of the LIWC has increased and the program has shown its value in measuring emotions (Kahn et al., 2007).
Changes in Company Performance. In general, company revenue is one of the most
also seen as a relevant indicator of effective leadership (Kaiser et al., 2008) and of a CEOs’’ performance (Allgood & Farrell, 2000). Hence, the revenues of the different companies for 2010 and 2011 were directly retrieved from the official annual reports and 10-K-forms (De Vasconcellos e Sá & Hambrick, 1989). To compute changes in company performance, the respective performance indicators of the two years were compared. The resulting deltas give an indication (in percentage terms) if the performance increased or decreased between 2010 and 2011.
CEO tenure. CEO tenure was measured as the number of years a CEO has occupied his or
her current position (McClelland et al., 2012). This information was also gathered from the 10-K-forms.
Control Variables. To reduce the possibility of unmeasured variables biasing the results, I
controlled for several variables. Specifically, I controlled for word count in the respective shareholder letter, industry, company size (i.e., revenue 2010), and age of the CEO. Industry and Revenue were retrieved from the company information in the Fortune 500 list (CNN, 2011) and classified into Heavy Industry, Light Industry, Services, Finance and Insurance, and Retail and Wholesale. The classification was based on indication found in the Fortune 500 list (CNN, 2011). Because data of several industries with a high spread in revenue was used in the same regression it was important to adjust for the differences in those industries and control for industry and revenue (De Vasconcellos e Sá & Hambrick, 1989). CEO age was gathered from the additional information in the 10K forms (SEC, 2013).
DATA ANALYSIS AND RESULTS
control variables were tested. In the second step, the main effects of company performance and tenure on positive and negative emotion expression, as stated in Hypotheses 1 and 2, were analyzed. In the third step, the respective interaction term was added to test Hypotheses 3 and 4.
Results
Descriptive Statistics. In Table 1, the means, standard deviations, and bivariate
correlations between the variables of interest are shown. The correlation between changes in company performance and positive as well as negative emotion expression were not significant. However, tenure and negative emotion expression were positively and significantly related (r = .33; p<.01). Furthermore, several significant positive and negative correlations between the control variables and independent and dependent variables exist. For example, were negative emotion expression and positive emotion expression negatively and significantly related (r=-.29; p<.01). Tenure and age related positively and significantly (r=.54; p<.01) and positive emotion expression correlated negatively and significantly wit h word count (r=-.28, p<.01) and light industry (r=-.24; p<.05).
--- Insert Table 1 here --- Hypotheses Test
(ß=.14, n. s.) or negative emotion expressions (ß=-.11, n. s.). Hence, Hypotheses 1 and 2 had to be rejected.
To test the moderating effect CEO tenure, the interaction term of CEO tenure and revenue change (changes in company performance) was inserted in Step 3 of the regression analyses. Hypotheses 3 and 4 predict that CEO tenure will moderate the relationship between changes in company performance and positive (negative) emotion expressions. Contrary to the prediction in Hypotheses 3, no moderation effect was found between changes in company performance, CEO tenure, and positive emotion expression (ß=.00; n. s.). As a result Hypotheses 3 had to be rejected.
Nevertheless, Model 3 in Table 3 shows a significant moderation effect of changes in company performance and CEO tenure on negative emotion expression (ß=-.27; p< .05). Following the recommendations of Aiken and West (1991), this significant interaction on negative emotion expression was graphically explored in Figure 2. The graph shows an unexpected study result. Contrary to my expectations, the relationship between changes in company performance and negative emotion expressions is strongly negative when CEO tenure is high, but only very weakly positive when CEO tenure is low. The relationship is therefore more pronounced for CEOs with high tenure rather than low tenure. Hence, Hypotheses 4 had to be rejected. I will address this unexpected pattern of interaction in the Discussion section.
--- Insert Tables 2 and 3 and Figure 2 here --- Supplementary Analyses
provided by the LIWC software) as additional dependent variables. In Tables 4, 5 and 6, the regression analyses for anxiety, anger and sadness can be found. After taking the effects of the various control variables on the dependent variables into account, it was found that changes in company performance did not have significant main effect (i.e., Step 2 of the regression models) on neither anxiety (ß=-.06; n. s.), nor sadness expressions (ß=.12; n. s.). However, it was found that changes in company performance did have a negative and significant main effect on anger expressions (ß=-.29; p<.05).
To test the moderating effect of CEO tenure, the interaction term of CEO tenure and changes in company performance was inserted. Between changes in company performance, CEO tenure and anxiety (ß=-.14; n. s.), anger (ß=-.06; n. s.) and sadness (ß=-.13; n .s.) no moderating effects were found.
--- Insert Tables 4, 5 & 6 here ---
DISCUSSION
changes in company performance, CEO tenure, and positive emotion expressions was found. Although some of the findings do not reinforce previous research, others represent more novel discoveries concerning the relationship of changes in company performance, CEO tenure, and emotion expression.
A possible explanation for the non-significant findings for the main effect of changes in company performance could be that the model used was too simplistic to analyze the appraisal process of emotion, and additional factors have to be taken into account. It seems likely that the appraisal process that triggers emotion expressions is not only provoked by one but a variety of factors. It appears to me that diverse individual, contextual, and situational factors might play an important role in the appraisal process. Lazarus (1991), for example, declares that the appraisal process depends on the individual and might be different from individual to individual. According to Lazarus (1991), values and personal significance vary greatly among individuals and shape appraisal and the resulting emotions. Therefore, it is important to notice that an emotion requires an evaluation of the individually perceived significance of what is happening in a specific situation or context (Lazarus, 1991). Taking the personal values but also contextual and situational factors into account when analyzing possible antecedents of leaders’ emotions would therefore be a starting point for further research.
Despite the lacking evidence for the direct influence of changes in company performance on emotion expression, this study still contributes empirical evidence in support of one aspect of the antecedents of emotion expressions. With respect to negative emotion expressions found in CEOs’ shareholder letters, this study extends prior research by showing that the interaction of changes in company performance and CEO tenure has a significant influence.
pronounced for CEOs with high tenure rather than for low-tenure CEOs. Namely, it was found that CEOs with high tenure react more strongly with negative emotion expressions to decreasing company performance results. Furthermore, low-tenure CEOs react only marginally with negative emotion expressions to changes in company performance. These findings are contradicting my expectations and challenge the findings of Hambrick and Fukutomi (1991). I suggested that, due to disengagement, company performance results are appraised as less meaningful to high-tenure CEOs. Therefore, I expected that those CEOs would be less emotionally expressive – in direct contrast to the actual findings of this research.
external labor market as having less to offer to prospective employers” (McClelland, et al., 2012, p. 1388). Another speculation of mine is that especially negative changes in company results can negatively affect the image and also the heritage of the CEO. These aspects could be appraised as harmful events by the CEO, and result in negative emotion expression, particularly with high tenure, because the CEO sees his/her achievements endangered.
Contrary to the moderating effect of changes in company performance and CEO tenure on negative emotion expression, there was no interaction effect found of changes in company performance and CEO tenure on positive emotion expressions. A possible explanation for these outcomes could be that beside individual, contextual and situational factors also cultural factors are important in the appraisal process of emotions (Ekman, 1999). In this research, shareholder letters from U.S. American companies have been analyzed, which suggests that the findings of this research are largely influenced by the U.S. American culture. It was found that the North American culture is, for example, characterized by an increased importance of personal achievements and the pursuit of own goals (Kitayama, Mesquita & Karasawa, 2006). Furthermore, Americans like “to see themselves in a positive light” (Kitayama et al., 2006, p. 892), and show a strong tendency towards a positive self-image. This positive self- image was found to be supported by the experience of positive emotions (Kitayama et al., 2006). Furthermore, those positive emotions are also expressed and displayed outwardly for self-presenting goals (Hayes & Metts, 2008). However, it was also found that Americans exaggerate the use of positive emotion expression and simply “overreport” positive emotion to enhance their self-image (Kitayama et al., 2006).
positive emotions are triggered. On the other hand, it could be that American CEOs exaggerate the use of positive emotion expression to enhance their image. However, further research is needed to establish the role of cultural influence on the appraisal process.
By conducting supplementary analyses, in which the relationships between changes in company performances, CEO tenure and anxiety, anger, and sadness were tested, further interesting findings were gained. It was found that changes in company performance have a negative and significant main effect on CEOs’ anger expressions. This might imply that changes in company performance could be the antecedents of anger expressions. However, no significant main effects could be found between changes in company performance and sadness and anxiety expression. Furthermore, no interaction effects between changes in company performance, CEO tenure and anxiety, sadness, and anger were found.
The reason why only a significant main effect on anger was found could be various. Research has shown, for example, that high status leaders use anger to express their dominance and legitimacy (Hess, Adams & Kleck, 2005), and use anger to express that they are not satisfied with the current situation (Van Doorn, Heerdink & Van Kleef, 2012). In addition, it was found that leaders who are expressing anger are perceived as more competent (Hess et al., 2005). Furthermore, it was established that people who are expressing sadness are rated low on dominance and affiliation by others (Van Doorn et al., 2012). Moreover, anxiety expresses uncertainty and the loss of power and control (Lazarus, 1991).
Limitations
In spite of the methodological strengths of this study (e.g. a large organizational sample), there are limitations that call for attention in interpreting the results. First, the research was conducted by analyzing CEO shareholder letters; however, it is unsure whether the shareholder letters were actually written by the CEO him-/herself or by a ghostwriter. This could be a constraint because it might imply that the emotions found are not the emotions of the CEO. Still, it has to be taken into account that the thinking and issues infused in the shareholder letter are determined primarily by the CEO and that the letters are indicative of the CEOs mindset (Craig & Amernic, 2011). Furthermore, by means of their signature, CEOs are held legally responsible for the content of the respective letters (Craig & Amernic, 2011). Therefore, it can be expected that the shareholder letter reflects and constitutes the reality seen by the CEO (Craig & Amernic, 2011). In addition, prior research has frequently used shareholder letters to make inferences about CEOs (e.g. Hyland, 1998, Craig & Amernic, 2011).
Second, a cross-sectional research design was employed, which renders it impossible to determine the direction of causality. However, according to Child (1976) the data collected can be seen as plausible and valid. This can be assumed, because the data obtained is derived from measures which were taken of company characteristics (e.g. shareholder letters, performance results, CEO tenure, age, gender) at a specific point in time from valid sources (Child, 1976). This is important because the relationships between emotion expression and other factors in this research design have been examined through a correlation and not through an analysis of how the variables change in association with one another over time (Child, 1976). To establish causality, future research should utilize longitudinal studies and field experiments (Stahl & Voigt, 2008).
that the appraisal process is different for every individual (Scherer, 1999), different personality traits should be included. Controlling for different personality traits, like the Big 5 personality trait extraversion, due to their importance in the leadership process (Yukl, 2013), could have provided a more rigid test of the hypotheses.
Finally, the sample characteristics may limit the generalizability of the findings, because the data were collected from a specific kind of organization (Fortune 500) and CEO type. Therefore, the generalizability of the findings is also limited to CEOs of Fortune 500 companies. All organizations in this research belong to the top 150 companies of the Fortune 500, which are the best performing organizations in the USA and even in the world. All companies are listed on the stock market, which restricts the findings to those types of organizations and excludes small and medium-sized companies and their CEOs (Geppert & Lawrence, 2008). Reasons for those restrictions are: First, those companies are often not listed on the stock market and are not legally required to publish an annual report with shareholder letters (Geppert & Lawrence, 2008). Second, it is hard to compare CEOs of Fortune 500 companies with CEOs of small and medium-sized companies because they have a different scope of responsibility. Furthermore, the results are restricted to CEOs with a North-American-cultural background. It is therefore questionable whether the results could be generalized to CEOS from for example China, Germany or the Netherlands.
Future Research Directions
Taking the limitations of this research into account, future research could extend the research findings by exploring factors which could influence the appraisal process of a CEO. The current research results show that more aspects are likely necessary to find and appoint the antecedents of positive or negative emotion expressions. To find the antecedents of emotion expressions and to understand the appraisal process in detail, future research could examine why certain events trigger the appraisal process of a CEO and of what importance these events are to the CEO.
To achieve this, personal information about the CEOs are needed. However, it might be difficult to obtain this data directly from the CEOs of the Fortune 500 or 1000 companies. It would therefore be interesting to change the research design and setup, by not analyzing shareholder letters, but by conducting a survey study with CEOs from small and medium-sized companies instead of the CEOs of the Fortune 500/1000. With the conduction of a survey study it would be possible to gain information like the CEOs’ character traits, cultural or ethnic background, or the importance of personal achievement. Furthermore, it would be possible to directly ask the CEO, which event evoked positive or negative emotions. With this method, data concerning the individual appraisal process would be provided in detail. This could help to analyze the specific event which stimulated the appraisal process and what emotion (positive or negative) was triggered. Such detailed knowledge could help to accurately determine the antecedents of positive and negative emotions of leaders.
constant or if they lost their relevance over the years and new antecedents triggered these emotions.
Moreover, future research could test different moderating effects on the relationship of changes in company performance and positive/negative emotion expressions. Possible moderating effects could the total company tenure, influence of the board of directors, the threat of possible mergers or acquisitions, company culture, but also personality traits like the Big 5 personality dimensions. The different moderators would have different effects. For example, it could be possible, when the threat of a merger and acquisition exists, that CEOs appraise negative changes in company performance as harmful (Rovenpor, 1993). This situation would be appraised as harmful, because it might threaten the power position of the CEO and hence would stimulate negative emotions. Furthermore, it could be possible that, the influence of the board moderates the relationship between changes in company performance and emotion expressions; negative changes in company performance would be appraised as harmful and hence trigger negative emotion expression, because the CEO might see his/her paradigm or position endangered (Graffin et al., 2012).
In addition, the supplementary analyzes has shown that it would also be interesting to analyze the relationship of changes in company performance, CEO tenure anxiety, anger and sadness. These results might provide more information about the emotions in the leadership process, for example the strategic use of emotion to influence their followers (Bono & Ilies, 2006).
Practical Implications
more effectively to strategically impress the shareholders (Fanelli, Misangyi, Tosi, 2004). Further, CEOs can direct their attention towards not using too many negative emotion expressions and more positive emotion expressions in their shareholder letters, in order to avoid a possibly negative image on the side of the shareholders. This is important because the firm’s reputation can be predicted through the content of the shareholders’ letter (Geppert & Lawrence, 2008). If the image or reputation is perceived negatively by the shareholders, less investment by shareholders into the company could be the consequence. CEOs can control the opinions of the shareholders by controlling the use of emotion expressions (Fanelli, et al., 2004). This could have the effect that shareholders perceive the CEO as credible and worthy of the hierarchical position, even though the CEO is facing a highly uncertain and vulnerable position. This in turn could decrease the high level of job uncertainty and therefore secure the future position, even when company results are negative.
CONCLUSION
analyses, it was found that changes in company performance relate to anger expressions, which implies that changes in company performance might be the antecedents of anger.
The present study has taken some steps toward understanding the relationship between potential antecedents of leaders’ emotions and their positive and negative emotion expressions. Building on the findings of this study, I hope that future research will be able to deepen the knowledge about the antecedents of emotions and the appraisal process, and give further insight into the role of emotion in the leadership process.
ACKNOWLEDGEMENTS
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FIGURE 2 Two- way Interaction
TABLE 1
Descriptive Statistics and Correlations
Variable M SD 1 2 3 4 5 6 7 8 9 10 11 12 13 14 1. Word count 1888.09 2262.07 2. Age 57.61 6.27 .15 3. Revenue 2010 53829.1 60929.26 .11 .08 4. Heavy Industry .26 .44 -.16 .10 .1 5. Light Industry .18 .39 -.06 -.05 -.09 -.28** 6. Service .14 .34 -.02 .03 -.09 -.24* -.19 7. Finance &Insurance .24 .43 .31** .00 .04 -.28** -.26** -.22*
8. Retail & Wholesale .19 .39 -.09 -.07 .08 -.29** -.23* -.19* -.27** 9. Positive Emotion 5.02 1.17 -.28** -.08 -.01 -.00 -.24* .00 .04 .18 10. Negative Emotion .74 .49 .23* .17 -.07 .06 -.03 -.05 .21* -.24* -.29** 11. Anxiety .17 .23 .17 -.02 .01 -.16 .12 -.10 .27** -.16 -.13 .61** 12. Anger .15 .23 .04 .15 -.08 .45** -.04 -.01 -.21* -.23* -.26** .43** -.05 13. Sadness .21 .24 .07 .08 -.02 -.05 -.14 -.07 .29** -.05 -.14 .65** .14 -.01 14. Revenue Change 10/11 5482.41 12912.97 -.13 .07 .64** .36** -.09 -.04 -.16 -.03 .09 -.13 -.10 -.05 -.02 15. Tenure 7.45 7.85 .18 .54** .00 -.05 .06 .01 .11 -.16 -.14 .33** .11 .10 .29** -.08
Note Revenue in Million $ **. p<0.01
TABLE 2
Regression analysis of positive emotion expressions
Variables entered Model 1 Model 2 Model 3
ß ß ß Word count -.32** -.29** -.29** Age -.02 .01 .01 Revenue 2010 .01 -.09 -.09 Heavy Industry -.18 -.23 -.23 Light Industry -.34** -.34** -.34** Service -.11 -.12 -.12
Finance & Insurance -.03 -.02 -.09
Revenue Change 10/11 .14 .15
Tenure -.07 -.07
Revenue Change x Tenure .00
Δ R² .17** .01 .00
TABLE 3
Regression analysis negative emotion expression
Variables entered Model 1 Model 2 Model 3
ß ß ß Word count .18 .15 .18 Age .13 -.03 -.01 Revenue 2010 -.13 -.03 -.00 Heavy Industry .21 .25* .21 Light Industry .12 .09 .05 Service .07 .07 .03
Finance & Insurance .26* .22 .15
Revenue Change 10/11 -.11 -.00
Tenure .29** .23*
Revenue Change x Tenure -.27*
Δ R² .13* .07* .04*
TABLE 4
Regression analysis anxiety
Variables entered Model 1 Model 2 Model 3
ß ß ß Word count .09 .08 .10 Age -.02 -.07 -.06 Revenue 2010 .01 .05 .07 Heavy Industry .00 .02 -.00 Light Industry .20 .19 .18 Service .01 .01 -.01 Finance &Insurance .30* .29* .25 Revenue Change 10/11 -.06 -.16 Tenure .08 .04
Revenue Change & Tenure -.14
Δ R² 0.12 0.01 0.01
TABLE 5
Regression analysis anger
Variables entered Model 1 Model 2 Model 3
ß ß ß Word count .15 .10 .11 Age .08 .06 .06 Revenue 2010 -.13 .06 .07 Heavy Industry .53** .62** .61** Light Industry .12 .13 .12 Service .12 .15 .14 Finance &Insurance -.05 -.05 -.07 Revenue Change 10/11 -.29* -.33* Tenure .05 .04
Revenue Change & Tenure -.06
Δ R² 0.27** 0.04* 0.00
TABLE 6
Regression analysis sadness
Variables entered Model 1 Model 2 Model 3
ß ß ß Word count -.03 -.04 -.02 Age .09 -.09 -.08 Revenue 2010 -.04 -.11 -.09 Heavy Industry -.02 -.06 -.08 Light Industry -.08 -.13 -.15 Service -.04 -.07 -.09 Finance &Insurance .26* .21 .18 Revenue Change 10/11 .12 .03 Tenure .33** .30**
Revenue Change & Tenure -.13
Δ R² 0.1 0.08** 0.01
