Drawing on trait-interaction theory and the literature on restructuring decisions in times of financial distress, we examined the effect of managerial narcissism, optimism and emotional stability on managers strategic decisions in times of adversity. In particular, we focus on managers choice between in-court and out-of-court (private) restructuring procedures. Using survey-based data from an original sample of 230 French SMEs facing financial distress, we show that managers’ narcissism and optimism are negatively associated with their choice of in-court restructuring. However, we show that CEO emotional stability is positively related to the choice of in-court restructuring. Further, we investigate the moderating effect of emotional stability on the relationship between managerial narcissism and optimism and the choice of restructuring strategy. Our findings support the idea that emotional stability can have a self-regulating role and reduce the effect of subjective preferences and beliefs of optimistic managers but not the one of narcissistic managers.