Does CEO emotional bias affect performance?

Figures & data

Table 1. CEO-characteristics percentages

Age	Percentages
35–50 years	22
50–55 years	50
Over 55 years	28
Gender
Male	47
Female	53
Degree
Baccalaureate	18
Baccalaureate +2	32
Baccalaureate +4	29
More	21

Table 2. Items used with respect to the optimism bias scale (6 items)

Items	Component optimism (57.125% of the total variance)
I foresee the upcoming life events positively	0.640
I plan to contribute with accomplishments that would sound greater than the average achievements	0.758
In general, I would feel really optimistic whenever I have to decide for something important	0.813
I feel pessimistic with regard to the bank’s internal status	0.481
The surrounding bank managers appear to have an effective needs’ analysis	0.678
I feel confident as to my colleagues’ estimations	0.660

Table 3. Items used with regard to the overconfidence bias scale (5 items)

Items	Component overconfidence (62.236% of the total variance)
My files’ assessments prove to be accurate	0.861
I think I can anticipate the customers’ deception	0.841
It is easy to pay a particular attention to my objectives and accomplish my goals	0.786
I feel rather intelligent with respect to the majority of my colleagues	0.743
My colleagues take me for a good CEO	0.712

Table 4. Items used regarding the loss-aversion bias scale (6 items)

Items	Component loss aversion (62.47% of the total variance)
Even in those cases when success is not taken for granted, I would make an attempt to achieve it	0.805
I have a comprehensive insurance coverage	0.861
My decisions are always taken with great care and precision	0.664
In financial contexts, the word « risk » signifies « danger »	0.689
I would take challenging decisions once I feel sure of the targeted results	0.625
I usually try to predict the negative results likely to emanate from my acts	0.777

Table 5. The incentive systems’ factors (4 items)

Items	Factor 1: (28.82% of the total variance)	Factor 2: (16.87% of the total variance)
Increasing the salary or the premium	0.929
Bonus	0.928
Promotion		0.899
Working autonomy		0.446

Table 6. Items used with respect to the evaluation systems’ scale

Items	Factor 1: (50.71% of the total variance)	Factor 2: (29.45% of the total variance)
The skills acquired by the accounts manager are regularly determined and evaluated	0.842
I observe the accounts manager’s decisions following the setting up of expectations	0.845
Among the files decided upon after being delegated to the branch, the criteria adopted to interpret the decision-maker’s declared decisions are performance and objectives’ achievement	0.857
Among the files decided upon after being delegated to the branch, the criteria adopted to interpret the decision-maker’s declared decisions are skills and professionalism		0.774
I only state to the accounts manager the objectives expected to be achieved by the bank		0.751

Table 7. Descriptive analysis of the variables of the model

LV (latent variable)	MV (manifest variable)	Observations	Missing observations	Minimum	Maximum	Average	Deviation standard
Bank performance	ROE	100	0	−1.400	2.200	0.653	1.184
	ROA	100	0	−8.400	22.600	8.215	10.355
Incentive systems	INCS1	100	0	0.200	1.000	0.505	0.209
	INCS2	100	0	0.200	0.933	0.523	0.203
Evaluation system of the performance of accounts manager	ESP1	100	0	0.200	1.000	0.574	0.260
	ESP2	100	0	0.100	1.000	0.586	0.263
Optimism of the Bank CEO	OPT1	100	0	0.200	1.000	0.561	0.299
	OPT2	100	0	0.200	1.000	0.571	0.283
Loss aversion of the Bank CEO	LA1	100	0	0.200	1.000	0.571	0.253
	LA2	100	0	0.200	1.000	0.597	0.254
Overconfidence of the Bank CEO	OVER1	100	0	0.200	1.000	0.597	0.262
	OVER2	100	0	0.200	1.000	0.518	0.218
Size and organizational complexity of the bank	SIZB	100	0	0.000	1.000	0.500	0.500
Size of the branch	SIZAG	100	0	0.000	1.000	0.310	0.462
Organizational complexity of the branch	COMAG	100	0	0.000	1.000	0.460	0.498

Table 8. Effectiveness of the bloc (composite reliability)

Latent variable	Cronbach alpha	Rho DG	First VP	Second VP
Bank performance	0.943	0.972	1.892	0.108
Optimism of the Bank CEO	0.955	0.978	1.914	0.086
Loss aversion of the Bank CEO	0.906	0.955	1.828	0.172
Overconfidence of the Bank CEO	0.791	0.905	1.654	0.346
Incentive systems	0.817	0.916	1.691	0.309
Evaluation system of the performance of the accounts manager	0.828	0.921	1.706	0.294

Table 9. Cross-loading

	OPT	LA	OVER	PER	SIZB	SIZAG	COMAG
OPT1	0.978	−0.887	−0.844	0.725	−0.653	−0.584	0.534
OPT2	0.978	−0.837	−0.800	0.721	−0.632	−0.557	0.484
LA1	−0.832	0.957	0.760	−0.711	0.638	0.471	−0.480
LA2	−0.853	0.955	0.832	−0.699	0.615	0.541	−0.491
OVER1	−0.808	0.788	0.916	−0.645	0.622	0.585	−0.487
OVER2	−0.717	0.724	0.903	−0.603	0.568	0.489	−0.490
ROE	0.695	−0.703	−0.645	0.971	−0.543	−0.386	0.367
ROA	0.741	−0.730	−0.690	0.974	−0.562	−0.425	0.389
SIZB	−0.657	0.655	0.655	−0.568	1.000	0.670	−0.522
SIZAG	−0.583	0.529	0.592	−0.417	0.670	1.000	−0.402
COMAG	0.520	−0.508	−0.537	0.389	−0.522	−0.402	1.000

Table 10. Convergent and discriminant validity (AVE > squared correlation)

	OPT	LA	OVER	SIZB	SIZAG	COMAG	PER	Average communalities (AVE)
OPT	1	0.776	0.706	0.431	0.340	0.271	0.546	0.957
LA	0,776	1	0.692	0.429	0.280	0.258	0.544	0.914
OVER	0.706	0.692	1	0.429	0.351	0.288	0.471	0.827
SIZB	0.431	0.429	0.429	1	0.449	0.272	0.323
SIZAG	0.340	0.280	0.351	0.449	1	0.161	0.174
COMAG	0.271	0.258	0.288	0.272	0.161	1	0.151
PER	0.546	0.544	0.471	0.323	0.174	0.151	1	0.946
Average communalities (AVE)	0.957	0.914	0.827				0.946	0

Figure 1. Model “a” results: Relationship between emotional biases–bank performance.

Table 11. Structural model (relationship between emotional biases-bank performance)

Dependent variable	Latent variable	Value	Standard deviation	t	Pr > |t|
Bank performance	Optimism of the bank CEO	0.355	0.156	2.272	0.025
	Loss aversion of the bank CEO	−0.298	0.152	−1.961	0.053
	Overconfidence of the bank CEO	−0.133	0.136	−0.974	0.333
	Size and organizational complexity of the bank	−0.153	0.105	−1.465	0.146
	Size of the branch	0.106	0.094	1.136	0.259
	Organizational complexity of the branch	−0.055	0.082	−0.677	0.500
	R^2	0.594

Figure 2. Model “b” results: Mediator role of control systems.

Table 12. Mediating effect of control systems

Model 4b	Reg	Sig(t)		Reg	Sig(t)	Mediation
Optimism of bank CEO  Bank’s performance	0.176	1.107	Performance assessment systems  Bank’s performance	−0.400	−2.978	Complete
Bank CEO’s loss aversion  Bank’s performance	−0.220	−1.384				Complete