Do the personal attributes of CEOs matter in the IPO pricing process? An examination of charisma and humility

Abstract Research Summary Building on upper echelons theory and implicit leadership theory, we examine if the personal attributes of CEOs of firms undertaking an initial public offering influence the pricing decisions of investment bankers. We argue that charisma and humility in CEOs alter two of the most important decisions of investment bankers: determining the firm's offer price range and setting the firm's actual offer price. Specifically, we argue that the perceptions and negotiation abilities of more charismatic CEOs result in higher offer prices and smaller offer price ranges for their firms. We also argue that the perceptions and negotiation abilities of more humble CEOs result in lower offer prices and broader offer price ranges for their firms. Managerial Summary We investigate how charisma and humility in CEOs of firms undertaking an initial public offering influence two of the most important decisions of investment bankers: determining the firm's offer price range and setting the firm's actual offer price. We show that firms led by more charismatic CEOs enjoy higher offer prices and smaller offer price ranges due to their perceptions of being an effective leader and their strong negotiation abilities. We also show that firms led by more humble CEOs have lower offer prices and broader offer price ranges since humble leaders fall outside of expected perceptions of effective leaders and lack strong negotiation abilities. Ultimately, our study demonstrates the importance of CEO characteristics on pricing decisions throughout the initial public offering process.