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1. Introduction
“It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you’ll do things differently” aptly stated by Warren Buffett, CEO of Berkshire Hathway and a great American business tycoon as well as a philanthropist. This thought-provoking take on leadership by Buffett forms a secret to his accomplishments and moves our attention to Strategic management philosophy which is growingly concerned with upper managers and their impact on policy formulation and performance of the firm. But is it really feasible for these managers to have a necessary impact on the overall performance of the corporations they lead? Leadership exercised by chief executive officers (CEOs) is understood as a vital component for the revival of organizations (Tichy and Devanna, 1986) and as very vital to the top management of big firms (Katz and Kahn, 1978) as well as countries (House et al., 1991; Burns, 1978). Both the academic and popular works give an account of the usually shared belief that the CEO is the utmost influential organizational member in a growing organization (Hosmer, 1982; Hambrick, 1991; Pearce, 1981). CEOs’ power is commonly allied to their legitimate influence, as well as the extensive awareness of the organizations they work for and their strong effect on company’s strategic direction and internal processes (Roth, 1995; Beatty and Zajac, 1987; Mizruchi, 1983). It has also been laid forward that a CEO fixes the mood for the whole organization (Wheelen and Hunger, 1990) and that he is “The corporate head” (Norburn, 1989).
The Upper Echelon Model explains an important event in the area of behavioral finance. The theory expresses that the managerial background attributes or traits regulate organizational results, possible ways of action and the extent of performance (Hambrick and Mason, 1984). It proposes that the more difficult a judgement, for example strategic actions, the more crucial the individual characteristics of the top leaders, like gender, age and level of education. The proposition of the theory identifies that executives’ diverse traits affect their choices on structure and strategy and consequently it will directly have a bearing on firm’s strategic line of action and organizational performance (Nielsen, 2010). Furthermore, the theory stresses that the front-runners who are rational will make a verdict...