Charismatic Signalling and Investment Decisions

Abstract

This thesis explores the pervasive association of charisma with financial decision-making, bridging two distinct yet interconnected domains: angel investment and stock market investment decisions. Through rigorous empirical analysis, the research delves into how charismatic signalling by entrepreneurs and corporate executives shapes investment outcomes. The first study scrutinizes the impact of entrepreneurial charisma on angel investors’ funding decisions. Leveraging objective charisma measures derived from Shark Tank episode transcripts spanning 2009 to 2021, the research documents a positive association between entrepreneurial charisma and the likelihood of securing angel investment, after controlling for financial indicators and observable entrepreneurial attributes shown in prior literature to influence investment decisions. This effect persists across entrepreneur gender and attractiveness, underscoring the effect of charisma in the angel investment context. The second study extends the investigation to the stock market, examining how executive charisma signalling during earnings calls is associated with investor behaviour and stock performance. Utilizing transcripts from earnings calls of S&P 1,500 companies from 2002 to 2021, the study suggests that charismatic signalling by executives is correlated with positive stock market reactions, even in contexts rich in information. This suggests that charisma serves as a potent tool for executives to sway investor perceptions and decisions, beyond the factual financial performance conveyed. Together, these studies illuminate the critical role of charismatic communication in financial arenas, offering novel insights into the non-financial factors that is associated with investment decisions. The findings not only contribute to the academic discourse on entrepreneurship and capital markets based research but also offer practical implications for individuals seeking to navigate the complex dynamics of securing funding. By demonstrating the efficacy of charisma across different investment contexts, this thesis underscores the necessity for entrepreneurs and executives alike to harness the power of persuasive communication in their strategic efforts to secure funding and influence market perceptions.