Do CEO first impressions shape
corporate culture long-term?
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The influence of a new CEO's first actions on long-term corporate culture is an area academic research has largely overlooked. While the effect of CEO characteristics has been studied extensively through Upper Echelons Theory, the impact of the very first impression — formed by stakeholders in the days around a CEO's initial strategic decision — on culture has not been rigorously tested.
This thesis addresses that gap using data from S&P 1500 firms between 2006 and 2020, measuring CEO first impressions through cumulative abnormal returns (CARs) after their first strategic actions as a proxy for stakeholder perception.
Upper Echelons Theory
as the foundation.
Hambrick and Mason's (1984) Upper Echelons Theory argues that top executive characteristics significantly shape organizational outcomes. The thesis extends this to culture — using CARs as a measurable proxy for the "first impression" stakeholders form of a new CEO based on their initial strategic actions.
Corporate culture was operationalised using Li et al.'s (2018) machine-learning analysis of S&P 500 companies' publicly stated core values — capturing five dimensions: integrity, teamwork, innovation, respect, and quality.
The hypotheses
we tested.
A positive CEO first impression (positive CARs after the first strategic action) is associated with stronger corporate culture scores in the years following the transition.
Firm size moderates this relationship: the effect of CEO first impressions on corporate culture is stronger in larger firms, where media amplification and broader stakeholder exposure increase the signal's reach.
Measuring what's hard
to measure.
Independent variable — CEO First Impression
Cumulative Abnormal Returns (CARs) calculated around each incoming CEO's first major strategic action. CARs measure the market's reaction relative to what was expected — a positive signal reflects stakeholder optimism, negative reflects scepticism. Grounded in Zhang & Wiersema (2009).
Dependent variable — Corporate Culture
Culture scores derived from Li et al.'s (2018) machine-learning analysis of S&P 500 firms' publicly stated values. Five dimensions tracked: integrity, teamwork, innovation, respect, and quality. Measured in the 1–3 years following CEO transition to capture lasting effects.
Moderating variable — Firm Size
Natural log of total assets, drawn from Compustat. Larger firms receive more media coverage, giving the CEO's first impression a broader internal and external audience — hypothesised to amplify the culture effect.
Statistical analysis
OLS regression with control variables including firm age, industry sector, prior-year culture score, and CEO tenure length. Robustness checks via alternative CARs windows (3-day, 5-day, 11-day) and supplemental analyses by firm size quartile.
"Early impressions, often formed within seconds based on limited information, can have a lasting impact on how a leader is perceived — and on the organisation they lead. This paper asks: how long does that impression actually last?"
What the data
showed.
The analysis found a statistically significant positive relationship between CEO first impressions (measured via CARs) and subsequent corporate culture scores, supporting H1. CEOs who generated positive market reactions at their first strategic move led organisations that reported stronger cultural alignment in the following years.
The moderation effect of firm size (H2) showed partial support: the relationship was more pronounced in larger firms, consistent with the hypothesis that media amplification increases the cultural reach of a CEO's initial signal. Robustness checks across different CAR event windows confirmed the stability of the main finding.
The thesis contributes a quantifiable, market-based approach to studying the often-abstract relationship between leadership transitions and cultural change — one that can be applied to large-sample archival data where psychometric measurements are unavailable.