Promotie J.L.M. Berns MSc

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 moves closer to bankruptcy. Although the management literature recognizes the importance of managers in shaping organizational outcomes, their behavior in the context of corporate financial distress is less understood. Besides contributing to a variety of academic debates, practitioners benefit from this 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 empirical chapter is focussed 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, in which we find that schemas can both facilitate and inhibit such shifts. The third chapter contrasts formal ownership with psychological ownership, in which we examine the emotions managers display in response to a failure to meet aspirations, and how this relationship depends on formal ownership and feelings of ownership. Feelings of ownership appear to moderate the main relationship, and affect it above and beyond formal ownership. The fourth chapter investigates what verbal communication strategies CEOs use when they face a potential downgrade. We 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.