Credit Scores of Corporate Executives May Reveal Their Decisions

Published Date June 18, 2025
News Type College News

Which executive will be a ‘yes person’ and which will make a decision based on data? Credit scores may reveal the answer. (Credit: Getty Images)

 By Jeff Grabmeier, Ohio State News

The personal credit scores of top-level corporate executives can help explain their decision making in the corporate environment, at least when it involves evaluating risk, a new study suggests.

Researchers at The Ohio State University conducted an experiment with a national sample of high-level executives and found that those with subprime credit scores tended to be “yes persons” — even when it was counterproductive.

In contrast, executives with prime credit scores critically evaluated external information, more effectively processing decisions involving risk.

“Responsible CEOs do not want executives who are going to be  ‘yes persons,’ they want someone who evaluates data objectively,” said Noah Dormady, co-author of the study and associate professor at Ohio State’s John Glenn College of Public Affairs. “That’s the issue we’re picking up in this study.”

Executives with higher credit scores were much more likely to think thoughtfully and critically about the data and make objective decisions.

Associate Professor Noah Dormady
John Glenn College of Public Affairs

Dormady conducted the research with Yiseon Choi, a doctoral student in the Glenn College. Their study was published recently in the International Journal of Production Economics.

Executives who participated in this study self-reported their FICO scores, which is one type of credit score. The two biggest factors in FICO scores are a person’s payment history — such as how often they are late paying bills — and how much they owe. Other factors include their credit mix, length of credit history and how much new credit they have. 

These factors tend to be correlated with income; however the study focused exclusively on the top-level executives in a company, who are referred to as C-suite executives. These executives would all have similar levels of income.

Credit scores are known to be predictive of a person’s risk tolerance, Choi said. 

“This is important because prior research suggests that personal financial habits may extend to professional decision making,” she said.

Associate Professor Noah Dormady

This study involved data from a controlled experiment previously led by Dormady, and involving 303 C-suite executives at middle-market firms (those with annual revenues between $10 million and $1 billion), in partnership with Ohio State’s National Center for the Middle Market. 

In the experiment, the participants had to make an investment recommendation to a chief operations officer involving inventories. They had to decide whether to invest in inventories that could act as a buffer in case of a catastrophe, like a hurricane, that temporarily halted production at the company.

“The decision to stockpile inventories is one of opportunity cost. For a company, the cost of those inventories can take away from currently productive plant, equipment, and workforce. It can be a difficult decision that involves managing risk for the company,” Dormady said.

The executives in the study went through 10 decision making periods, and each period had 2 rounds. In each period, they were randomly given a unanimous recommendation from a group of advisers that, in the scenario, were appointed by their CEO. The advice in each period was either to invest in the inventory or not, and this was given between each round of decisions.

After that, the participants were told whether a catastrophe had occurred or not. Overall, the participants had a 25% chance of having a catastrophe in each period. In the end, some participants in the study experienced no catastrophes, and some had as many as 7 in their 10 periods.

The key finding was that executives with the best, prime credit ratings tended to take the advisers’ advice only when it matched their own experiences in the experiment. If the executives experienced more catastrophes, they were more likely to accept the advice of the advisers if they told them to invest in more inventory.

But they weren’t afraid to reject the advice if it conflicted with their own experience.

Those with higher FICO scores were more confident to make their own decisions, possibly because the financial decisions they made in their personal lives worked out well, compared to those with lower FICO scores.

Yiseon Choi, Doctoral Student
John Glenn College of Public Affairs

In fact, executives with subprime credit scores were about twice as likely to follow the advice of advisers, even when it was inaccurate, when compared to those with prime credit.

“Executives with subprime credit were more likely to simply defer to the appointed advisors, even disregarding their lived experience,” Dormady said.

“That suggests executives with lower credit scores are more likely to be the type of decision maker who follows consensus over fact.”

The researchers noted that they took into account a variety of demographic and other factors about the executives in the study, including gender, veteran status and other personal details. But it was the FICO score that was most meaningful when it came to how they responded to risk in the scenarios.

Given the strong results in this study, does that mean companies should use FICO scores to screen candidates for top executive positions? Dormady said that is a complex question that raises ethical issues.

More replication studies should be done to confirm the results, he said, and guidelines are needed to ensure that credit score data is not misused or abused.

Jeff Grabmeier is senior director of research communications at The Ohio State University.