Spreading the Style: Firm Leaders’ Early Life Experiences and Employees’ Behavior and Performance

Leaders shape firm strategy not only through the decisions they make directly, but also through influencing employees’ workplace behavior. We argue that leaders’ formative life experiences, which shape personal traits, can influence employee behavior and work performance. Using detailed data from Chinese securities firms, we examine the impact of chairpersons’ experiences as “sent-down youths” (SDYs) during China’s Cultural Revolution, which instilled in them a strong work ethic in the face of adversity. We argue that SDY chairpersons encourage security analysts to increase efforts to improve the accuracy of earnings forecasts for the publicly listed firms they follow. We show that when the same analyst experiences a change in chairperson within the same securities firm—from one without any SDY experience to one with SDY experience (both within the same cohort)—their forecast accuracy for the same listed firm increases. Specific actions, such as conducting site visits to gather company information firsthand, contribute to improving forecast accuracy. We find that analysts led by SDY chairpersons are more likely to conduct site visits, visit more companies for the first time, visit companies located in less-accessible areas, ask more targeted questions during site visits, and update forecasts promptly after major events. To strengthen causal inference, we employ fixed effects, examine various types of chairperson turnovers, and employ instrumental variable approaches and placebo tests. Our study suggests that, through influencing employee behavior, the “style” of a firm leader spreads far within an organization. This paper was accepted by Alfonso Gambardella, business strategy. Funding: Y. Wang received financial support from the National Natural Science Foundation of China [Grants 72172090 and 72572103]; N. Xu received financial support from the National Natural Science Foundation of China [Grants 72225005 and 72495154]; and R. Xie received financial support from the National Natural Science Foundation of China [Grant 72202249] and the Program for Innovation Research in Central University of Finance and Economics. Supplemental Material: The online appendix and data files are available at https://doi.org/10.1287/mnsc.2024.09097 .