Do narcissistic CEOs rock the boat?
ISSN: 1940-5979
Article publication date: 17 April 2020
Issue publication date: 27 April 2021
Abstract
Purpose
The purpose of this paper is to investigate the role of narcissistic supply for the association between CEO narcissism and corporate risk taking.
Design/methodology/approach
The authors investigate a sample of 281 non-financial S&P 1500 firms and a corresponding 457 CEOs in the 10-yr period 2006–2015.
Findings
The association between CEO narcissism and corporate risk taking depends on the admiration, attention, and affirmation of own superiority (“narcissistic supply”) that the CEO receives given her/his current position. Thus, a narcissistic CEO with an insufficient narcissistic supply (small firm/small compensation) will crave for more and take more risks (“rock the boat”) while a narcissistic CEO with a sufficient narcissistic supply (large firm/large compensation) will protect the status quo and be reluctant to take new risks. Specifically, the authors find that a change from a slightly narcissistic CEO to a strongly narcissistic CEO, for positions entailing limited (abundant) narcissistic supply, is associated with an increase (a decrease) in corporate risk of 6%–8% (11%–27%).
Originality/value
Previous research indicates a positive association between CEO narcissism and corporate risk taking in specific domains such as M&A and R&D activities. This paper provides a novel contribution to the existing literature by identifying and assessing the important role of narcissistic supply for the association between CEO narcissism and corporate risk taking in general.
Keywords
Acknowledgements
We thank Dennis Albæk, Gennaro Bernile, Daniel Bradley, Nicklas Bang Eriksen, Arman Eshraghi, Johan Durup Fritzemeier, Sondre Oekstad Gjeldnes, Berit Hansen, Alain Krapl, Rasmus Laursen, Cecilie Lippe, Stig Vinther Moeller, Maurizio Montone, Mads Oestergaard, Christos Pantzalis, Jung Chul Park, Martina Pejic, Kristoffer Houmann Poulsen, Jianping Qi, Anders Bjerre Therkildsen, Frederik Villumsen, Jared Williams, Yuhao Zhu, conference participants at the 2018 Behavioral Finance Working Group Conference, and seminar participants at Aarhus University, Copenhagen Business School, and University of South Florida for helpful comments and suggestions. We bear sole responsibility for all remaining errors and omissions.
Citation
Aabo, T., Hoejland, F. and Pedersen, J. (2021), "Do narcissistic CEOs rock the boat?", Review of Behavioral Finance, Vol. 13 No. 2, pp. 141-164. https://doi.org/10.1108/RBF-09-2019-0118
Publisher
:Emerald Publishing Limited
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