A Nomological Network Exploration of CEO Ethical Leadership Behaviors

Ethical leadership has emerged as a key construct in leadership studies over the past two decades. Hundreds of scholarly articles have been published to fully understand its nature, antecedents, and outcomes. The overwhelming majority of this research relies on subjective assessments via survey instruments rather than direct measures of ethical leadership behaviors. This has resulted in a conflation of ethical leadership perceptions and intentions with behavior in the literature, leaving a gap in understanding the construct. To address this gap, signaling theory was applied to inform textual analysis using a large language model to detect verbal ethical leadership behavior in CEO annual letters to shareholders. The quantified signals were then correlated with objective secondary data from large datasets to begin exploring the nomological network of ethical leadership behavior. Through analysis of n=1049 CEO observations, correlations have been identified between CEO ethical leadership behavior, firm CSR performance, firm financial performance, CEO tenure, and firm market environment. The moderating effects of CEO tenure and CEO duality on relevant direct relationships were also tested. No moderating effect was found for CEO tenure on the relationships between ethical leadership behavior and firm financial performance or firm CSR performance. However, CEO duality was found to moderate the relationship between CEO ethical leadership behavior and firm financial performance but not firm CSR performance.