Taken With a Grain of Salt: Earnings Forecasts From Narcissistic CEOs

We examine whether CEO narcissism is associated with management forecast issuance and how investors respond to those forecasts. Narcissists look for opportunities for self‐enhancement, and earnings forecasts provide a setting to demonstrate managerial skills. We find that narcissistic CEOs are more likely to issue management forecasts. We document that forecasts issued by narcissistic CEOs are no more likely to be missed, no more optimistically biased, no less precise, and no less accurate than those issued by non‐narcissistic CEOs. We find that investors respond less favourably to good news management earnings forecasts from narcissistic CEOs. Our results suggest that investors treat management earnings forecasts from narcissistic CEOs as lacking credibility, even though they have similar forecast properties to those issued by less narcissistic CEOs.