By Paul P. Momtaz (

based on

Why are CEOs coached for many hours in preparation for important public announcements, such as their presentations at annual meetings? The extensive preparation is because CEOs know that shareholders, the media, and other stakeholders will pay close attention not only to what they present but to how they present. How CEOs are perceived when they confer information may provide important clues as to how CEOs interpret the information themselves. Does the CEO really believe in her profit forecast? Does she truly believe that her plan will help turn-around a failing company? 

The question of whether and how CEO emotions impact firm value is, therefore, an important one. The question has received some attention in the (mostly theoretical) strategic management literature, but it remains empirically understudied, in part because it is difficult to quantify CEO emotions. In my recent SMJ article, I use state-of-the-art artificial emotional intelligence (emotion AI) to quantify CEO emotions from publicly available photos and videos of CEOs recorded around the time of fundraising campaigns. This allows me to infer CEOs’ emotional traits during this crucial period and how investors might perceive CEOs. 

My study examines how CEO emotions influence firm valuation by both the CEOs themselves and investors during fundraising campaigns. Specifically, I examine how CEO emotions impact firm valuation in Initial Coin Offerings (ICOs). ICOs offer a suitable context to tackle my research question because, unlike conventional financing methods, ICO fundraising roadshows happen largely on the internet rather than behind closed doors, making the emotions that CEOs convey to potential investors readily observable.

CEO emotions seem to impact firm valuation in two distinct ways. First, CEOs with salient negative emotions seem to choose valuations that are more consistent with their industry peers’ valuations. This valuation conformity with their peers may be explained by cognitive processing that favors error avoidance and generally higher risk aversion among CEOs with salient negative emotions. 

Second, investors discount their valuations of firms which are headed by CEOs with salient negative emotions. The latter effect can be very pronounced. For example, a one-standard-deviation increase in negative emotions is associated with a discount on firm value that amounts to about 15%. This finding suggests that CEO emotions are of economic value to investors as a form of market signaling.

Both effects are more pronounced when there is relatively little public information about the ICO firm. Interestingly, these effects are not symmetric for positive and negative emotions. Only CEOs with salient negative emotions are associated with valuation conformity and discounted firm value. Interestingly, the opposite is not true, i.e., CEOs with salient positive emotions are not associated with lower valuation conformity and higher firm valuations. One potential explanation for the asymmetry in the emotion-valuation relation is that positive emotions are the norm in my research context, and only deviations from the norm (in the form of negative emotions) entail a discernible effect.

While my study offers new insights into how CEO emotions may impact firm value, it by no means provides a definitive, generalizable view on the topic. How CEO emotions impact firm valuation in other contexts seems to be a promising avenue for future research. Similarly, the long-term consequences of CEO emotions for firm performance remain an open question.

To facilitate future research on CEO emotions, my paper is accompanied by easy-to-implement emotion AI software that makes it easy to quantify emotions from public photo and video material.

Published Date
18 October 2020

Article Type
Article Summary/Abstract


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