High stakes strategic decision-making is inherently emotive, yet theoretical understanding of the role of emotions in strategic management remains limited, with senior executives seen as impervious to emotional influences. While cognitive and behavioral insights have informed knowledge of the determinants of firm performance, this study seeks to develop new theory by examining how CEO emotion regulation and affectivity (both positive and negative) shape strategic decision-making and, ultimately, firm performance. Drawing on theories of emotion regulation and affective appraisal, we theorize that CEO affectivity is a major influence on strategic decision-making, with these effects moderated by prevailing environmental conditions. Our model offers a theoretically grounded approach to understanding the mechanisms by which CEO emotional tendencies affect organizational outcomes, contributing to the literature on strategic decision-making. Using a longitudinal sample of 160 firms with triadic data from CEOs, CEO spouses, and CFOs alongside objective performance metrics, our findings substantiate these relationships, adding new theoretical understanding of the role of affectivity in strategic decision-making.
