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Comparison of financial performance in companies and mapping of the characteristics of the ideal manager in small and medium enterprises

Stokas-Saltsidis Vasileios

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Summary

The basic idea of the thesis is grounded in behavioral finance, which is a subset of a broader category, behavioral economics. Behavioral economics is based on the assumption that individuals often do not act based on logic and the way that would offer them optimal performance; instead, they frequently act based on emotions and their personal characteristics (behavioral traits). More specifically, behavioral finance addresses the same issue but focuses on the financial aspects, primarily the financial performance of a company. Building on the above, the thesis proposes approaching 3-4 small to medium-sized businesses, ideally from a similar industry. The decision-maker of each enterprise will be requested to complete a personality test, such as the Big Five or the 4 Myers-Briggs personality test. These tests map some characteristics of the individual and assign one of the 16 different personality types, contributing to building a characteristics profile for each company manager. Subsequently, the companies will be asked to provide their basic financial data, specifically the balance sheet and the income statement (Profit and Loss), and possibly some external investment strategies they may follow. Through these, some key financial indicators will be calculated, aiming to enable the comparison of companies regardless of their size. Through this comparison, the hope is to determine certain characteristics of the manager that lead to better financial performance for the company. By mapping the optimal characteristics/traits of the manager, a company can focus on specific traits it wants its manager to have through a simple personality test. Additionally, each manager can identify which characteristics they need to work on to improve in their role. Finally, it is hoped that correlations can be made between the manager's characteristics and specific strategic decisions made by the company. For example, managers with high levels of decisiveness may lead to companies with strong percentages in external investments (investments in equipment, human resources, additional facilities etc.). It's worth noting that a significant portion of the work will be dedicated to the literature review of behavioral finance to build a strong foundation behind the logic of this particular scientific field. Furthermore, the study will analyze the sector of small to medium-sized enterprises and the criteria required for a business to fall into this category. Lastly, will be provided the required scientific background for the selection of the financial indicators that will be analyzed.

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