CEO attention, emotion, and communication in corporate financial distress

Corporate financial distress is fascinating, as in times of adversity, managers have an outsized impact on whether their organization will overcome its financial hardship, or if it is closer to bankruptcy. Although the management literature recognizes the importance of managers’ actions in shaping organizational outcomes, their behavior in the context of corporate financial distress is less understood. Besides contributing to a variety of academic literatures, practitioners benefit from the dissertation’s insights as it allows them to better aid organizations and their leadership to (potentially) respond to financial woes.

This dissertation contains five chapters, out of which three empirical chapters. Each chapter is focused on the cognition, emotion, and/or behavior of CEOs which face organizational financial distress. Chapter two explores how mental schema affect organizations’ ability to shift their focus of attention in response to a crisis. The third paper contrasts formal ownership with psychological ownership, in which I examine the emotions managers display in response to a failure to meet aspirations, and how this relationship depends on formal ownership (e.g., owning shares) and feelings of ownership (i.e., psychological ownership). The fourth chapter investigates what verbal communication strategies TMT members use when they face a potential downgrade. I find that the incongruence between emotions in the tone of their voice and the sentiment in their wording affects the likelihood of receiving a downgrade.