Do narcissistic CEOs rock the boat?

PurposeThe purpose of this paper is to investigate the role of narcissistic supply for the association between CEO narcissism and corporate risk taking.Design/methodology/approachThe authors investigate a sample of 281 non-financial S&P 1500 firms and a corresponding 457 CEOs in the 10-yr period...

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Bibliographic Details
Published inReview of behavioral finance Vol. 13; no. 2; pp. 141 - 164
Main Authors Aabo, Tom, Hoejland, Frederik, Pedersen, Jesper
Format Journal Article
LanguageEnglish
Published Leeds Emerald Publishing Limited 27.04.2021
Emerald Group Publishing Limited
Subjects
Annual reports
Behavioral economics
Compensation
Executives
Freud, Sigmund (1856-1939)
Globalization
Hypotheses
Narcissism
Personality disorders
Psychological aspects
Psychologists
R&D
Research & development
Volatility
Narcissistic supply
Behavioral corporate finance
CEO narcissism
Corporate risk
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Summary:PurposeThe purpose of this paper is to investigate the role of narcissistic supply for the association between CEO narcissism and corporate risk taking.Design/methodology/approachThe authors investigate a sample of 281 non-financial S&P 1500 firms and a corresponding 457 CEOs in the 10-yr period 2006–2015.FindingsThe 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/valuePrevious 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.
ISSN:1940-5979
1940-5987
DOI:10.1108/RBF-09-2019-0118