The Relationship Between Top Managers’ Personality and Firms’ Performance

Research about the influence of upper-level managers on firms' decisions and performances has a promising body of literature investigating the relationship between top managers’ personality and firms’ performance, however, this research topic remains with a significant lack of consensus among scholars, and it has been largely underexplored in the context of Portuguese firms. This study proposes to cover this research gap and add to the literature by employing a novel approach combining objective and subjective measures of firms’ performance, which has been an overlooked methodology in prior research. The data was collected through an online questionnaire using a sample of top managers of Portuguese registered companies to analyze the influence of the big five personality traits – extraversion, agreeableness, conscientiousness, neuroticism, and openness to experience – of top managers on firms’ performance. The results presented in this study demonstrate the positive association between top managers’ extraversion and conscientiousness with subjective firm performance. Moreover, top managers’ neuroticism is found to negatively impact subjective performance, whereas their levels of agreeableness and openness to experience are not associated with this type of performance. Nonetheless, only top managers’ extraversion exhibits a negative relationship with objective firm performance, while their agreeableness, conscientiousness and openness to experience do not impact objective firm performance, contrasting with the majority of previous studies. Therefore, our findings show that a self-perceived performance does not necessarily translate into a similar objective performance, which suggests a potential bias in top managers’ self-assessments. This study underscores the promising influence of top managers’ personality on firms’ performance and provides potential insights and explanations for organizational decision-making and outcomes.