Tightening the leash after a threat: A multi-level event study on leadership behavior following the financial crisis

This paper presents the results of a multi-level event study of the effects of the 2008 financial crisis on leadership behavior. Following assumptions from the threat-rigidity hypothesis, we expect that across firms and countries, this crisis led to an increase in directive leadership. In line with this hypothesis, we also anticipate that this change is context-specific. The impact of the 2008 financial crisis on the change in directive leadership is analyzed for over 20,000 managers in 980 organizations across 36 countries. We find that the financial crisis went along with a significant increase in directive leadership, and that this effect was stronger in the manufacturing sector, and in countries with a high degree of power distance. Our results support the threat-rigidity hypothesis, and contribute to leadership research by showing that the context is not only a moderator but actually shapes leadership behavior. This opens up a new avenue of leadership research where context is an antecedent of leadership behavior more generally, and where the methodological set-up allows for causal inference.