By Dr Mei Yu (Assistant Professor in Finance)

When a company weathers a major economic crisis—like the global financial meltdown of 2008—we often credit (or blame) the CEO. But how much does leadership truly influence a firm’s performance during turbulent times?

Our recent research looks at publicly listed firms in both the US and China, offering fresh insight into what’s known as the “CEO effect”: the portion of a company’s performance directly attributable to its chief executive. The short answer? A CEO’s impact is real—but it shifts depending on how success is measured, and the economic context.

During the global financial crisis of 2007–2009, we found that the CEO effect on accounting-based performance—such as return on assets or return on sales—declined significantly. Faced with widespread disruption, CEOs had less ability to steer short-term financial results. After the crisis passed, their influence on these traditional metrics returned.

But here’s the twist: while influence over accounting outcomes fell, the CEO effect on market-based performance—like the market-to-book ratio—increased during the crisis. In times of uncertainty, it seems investors lean more on trust in leadership. The CEO became a symbol: of stability, vision, or risk.

This pattern wasn’t unique to one region. Despite major differences between the US and Chinese economies, we observed similar dynamics across both markets. That consistency points to something fundamental: leadership matters most when confidence matters most.

Another insight is that the resources a firm has going into a crisis shape how much its CEO can do. Companies with healthy financial buffers saw a smaller drop in CEO influence on accounting performance. More cash, more credit—more room for a CEO to act decisively. It’s a reminder that even great leadership needs the tools to be effective.

So, why does all this matter?

Because it reframes how we think about corporate leadership during crises. The CEO’s influence isn’t fixed—it expands and contracts with the economic weather. In calm times, leadership might play a background role. But in a storm, everyone’s eyes turn to the bridge. Investors start asking: Do I trust the person steering this ship?

And trust isn’t enough on its own. A visionary CEO still needs financial space to manoeuvre. Companies with stronger balance sheets don’t just weather downturns better—they allow their leaders to lead.

Ultimately, the CEO effect during crisis is about more than charisma or competence. It’s about credibility, context, and capacity. Boards, investors, and future business leaders would do well to remember: leadership matters most when the lights are flickering—and when there’s still enough fuel in the tank to do something about it.

*Read the full research manuscript at: Kleindienst, I., Youssef, M. H., Harakeh, M., & Yu, M. (2024). Does the CEO effect differ in times of crisis? Evidence from US and China during the global financial crisis. Journal of Business Research, 182, 114807.