IDEAS home Printed from https://ideas.repec.org/a/eee/riibaf/v69y2024ics0275531924000771.html
   My bibliography  Save this article

CEO narcissism and ESG misconduct

Author

Listed:
  • Martínez-Ferrero, Jennifer
  • Ramón-Llorens, M. Camino
  • García-Meca, Emma

Abstract

This paper analyzes how narcissistic CEOs behave regarding irresponsible environmental, social, and governance (ESG) strategies and whether this behavior is influenced by managerial power and the uncertainty of the environment in which the firm operates. Using a sample of Spanish firms from 2015 to 2019, the study finds that narcissistic CEOs avoid engaging in irresponsible ESG practices to safeguard their reputation and receive positive recognition from stakeholders and society. The results also suggest that the effect of CEO narcissism on ESG practices is moderated by CEO power and an uncertain environment. Narcissistic CEOs with more managerial power tend to avoid engaging in unethical ESG practices. Meanwhile, CSR committees and/or independent board directors limit the unethical ESG practices of narcissistic CEOs, confirming the relevance of both governance mechanisms in constraining ESG misconduct.

Suggested Citation

  • Martínez-Ferrero, Jennifer & Ramón-Llorens, M. Camino & García-Meca, Emma, 2024. "CEO narcissism and ESG misconduct," Research in International Business and Finance, Elsevier, vol. 69(C).
    • Handle: RePEc:eee:riibaf:v:69:y:2024:i:c:s0275531924000771
    DOI: 10.1016/j.ribaf.2024.102284
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0275531924000771
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.ribaf.2024.102284?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Sandra A. Waddock & Samuel B. Graves, 1997. "The Corporate Social Performance–Financial Performance Link," Strategic Management Journal, Wiley Blackwell, vol. 18(4), pages 303-319, April.
    2. Nie, Xinyu & Yu, Mingchuan & Zhai, Yuming & Lin, Han, 2022. "Explorative and exploitative innovation: A perspective on CEO humility, narcissism, and market dynamism," Journal of Business Research, Elsevier, vol. 147(C), pages 71-81.
    3. Giovanni Gavetti & Daniel A. Levinthal & Jan W. Rivkin, 2005. "Strategy making in novel and complex worlds: the power of analogy," Strategic Management Journal, Wiley Blackwell, vol. 26(8), pages 691-712, August.
    4. Yonghong Jia & Xinghua Gao & Scott Julian, 2020. "Do firms use corporate social responsibility to insure against stock price risk? Evidence from a natural experiment," Strategic Management Journal, Wiley Blackwell, vol. 41(2), pages 290-307, February.
    5. Carberry, Edward J. & Engelen, Peter-Jan & Van Essen, Marc, 2018. "Which Firms Get Punished for Unethical Behavior? Explaining Variation in Stock Market Reactions to Corporate Misconduct," Business Ethics Quarterly, Cambridge University Press, vol. 28(2), pages 119-151, April.
    6. David Roodman, 2009. "How to do xtabond2: An introduction to difference and system GMM in Stata," Stata Journal, StataCorp LP, vol. 9(1), pages 86-136, March.
    7. Chandler, Gaylen N. & Honig, Benson & Wiklund, Johan, 2005. "Antecedents, moderators, and performance consequences of membership change in new venture teams," Journal of Business Venturing, Elsevier, vol. 20(5), pages 705-725, September.
    8. Hayagreeva Rao, 1994. "The Social Construction of Reputation: Certification Contests, Legitimation, and the Survival of Organizations in the American Automobile Industry: 1895–1912," Strategic Management Journal, Wiley Blackwell, vol. 15(S1), pages 29-44, December.
    9. Mehdi Nekhili & Amal Boukadhaba & Haithem Nagati, 2021. "The ESG–financial performance relationship: Does the type of employee board representation matter?," Corporate Governance: An International Review, Wiley Blackwell, vol. 29(2), pages 134-161, March.
    10. Jensen, Michael C. & Meckling, William H., 1976. "Theory of the firm: Managerial behavior, agency costs and ownership structure," Journal of Financial Economics, Elsevier, vol. 3(4), pages 305-360, October.
    11. Antoinette Rijsenbilt & Harry Commandeur, 2013. "Narcissus Enters the Courtroom: CEO Narcissism and Fraud," Journal of Business Ethics, Springer, vol. 117(2), pages 413-429, October.
    12. Sah, Raaj Kumar & Stiglitz, Joseph E, 1986. "The Architecture of Economic Systems: Hierarchies and Polyarchies," American Economic Review, American Economic Association, vol. 76(4), pages 716-727, September.
    13. Jeffrey M Wooldridge, 2010. "Econometric Analysis of Cross Section and Panel Data," MIT Press Books, The MIT Press, edition 2, volume 1, number 0262232588, April.
    14. Jennifer Martínez‐Ferrero & Emma García‐Meca, 2020. "Internal corporate governance strength as a mechanism for achieving sustainable development goals," Sustainable Development, John Wiley & Sons, Ltd., vol. 28(5), pages 1189-1198, September.
    15. David H. Zhu & Guoli Chen, 2015. "Narcissism, director selection, and risk-taking spending," Strategic Management Journal, Wiley Blackwell, vol. 36(13), pages 2075-2098, December.
    16. Minji Kim & Tohyun Kim, 2020. "When Do CEOs Engage in CSR Activities? Performance Feedback, CEO Ownership, and CSR," Sustainability, MDPI, vol. 12(19), pages 1-13, October.
    17. Oleg V. Petrenko & Federico Aime & Jason Ridge & Aaron Hill, 2016. "Corporate social responsibility or CEO narcissism? CSR motivations and organizational performance," Strategic Management Journal, Wiley Blackwell, vol. 37(2), pages 262-279, February.
    18. Jensen, Michael C, 1986. "Agency Costs of Free Cash Flow, Corporate Finance, and Takeovers," American Economic Review, American Economic Association, vol. 76(2), pages 323-329, May.
    19. Alicia R. Ingersoll & Christy Glass & Alison Cook & Kari Joseph Olsen, 2019. "Power, Status and Expectations: How Narcissism Manifests Among Women CEOs," Journal of Business Ethics, Springer, vol. 158(4), pages 893-907, September.
    20. Sanja Pekovic & Sebastian Vogt, 2021. "The fit between corporate social responsibility and corporate governance: the impact on a firm’s financial performance," Review of Managerial Science, Springer, vol. 15(4), pages 1095-1125, May.
    21. Sheikh, Shahbaz, 2022. "CEO power and the likelihood of paying dividends: Effect of profitability and cash flow volatility," Journal of Corporate Finance, Elsevier, vol. 73(C).
    22. Habib, Ahsan & Muhammadi, Abdul Haris & Jiang, Haiyan, 2017. "Political Connections and Related Party Transactions: Evidence from Indonesia," The International Journal of Accounting, Elsevier, vol. 52(1), pages 45-63.
    23. Jeremy Galbreath, 2013. "ESG in Focus: The Australian Evidence," Journal of Business Ethics, Springer, vol. 118(3), pages 529-541, December.
    24. Harjoto, Maretno A. & Hoepner, Andreas G.F. & Li, Qian, 2021. "Corporate social irresponsibility and portfolio performance: A cross-national study," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 70(C).
    25. Ye Cai & Hoje Jo & Carrie Pan, 2012. "Doing Well While Doing Bad? CSR in Controversial Industry Sectors," Journal of Business Ethics, Springer, vol. 108(4), pages 467-480, July.
    26. Arpita Agnihotri & Saurabh Bhattacharya, 2019. "CEO Narcissism and Internationalization by Indian Firms," Management International Review, Springer, vol. 59(6), pages 889-918, December.
    27. Braunsberger, Karin & Buckler, Brian, 2011. "What motivates consumers to participate in boycotts: Lessons from the ongoing Canadian seafood boycott," Journal of Business Research, Elsevier, vol. 64(1), pages 96-102, January.
    28. Yi Tang & Cuili Qian & Guoli Chen & Rui Shen, 2015. "How CEO hubris affects corporate social (ir)responsibility," Strategic Management Journal, Wiley Blackwell, vol. 36(9), pages 1338-1357, September.
    29. Stéphane J. G. Girod & Richard Whittington, 2017. "Reconfiguration, restructuring and firm performance: Dynamic capabilities and environmental dynamism," Strategic Management Journal, Wiley Blackwell, vol. 38(5), pages 1121-1133, May.
    30. Cho, Charles H. & Patten, Dennis M., 2007. "The role of environmental disclosures as tools of legitimacy: A research note," Accounting, Organizations and Society, Elsevier, vol. 32(7-8), pages 639-647.
    31. Shih-Chi Chiu & Mark Sharfman, 2018. "Corporate Social Irresponsibility and Executive Succession: An Empirical Examination," Journal of Business Ethics, Springer, vol. 149(3), pages 707-723, May.
    32. Paolo Antonetti & Stan Maklan, 2016. "An Extended Model of Moral Outrage at Corporate Social Irresponsibility," Journal of Business Ethics, Springer, vol. 135(3), pages 429-444, May.
    33. Sandra Rothenberg & Stelios C. Zyglidopoulos, 2007. "Determinants of environmental innovation adoption in the printing industry: the importance of task environment," Business Strategy and the Environment, Wiley Blackwell, vol. 16(1), pages 39-49, January.
    34. Ingmar Björkman & Carl F Fey & Hyeon Jeong Park, 2007. "Institutional theory and MNC subsidiary HRM practices: evidence from a three-country study," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 38(3), pages 430-446, May.
    35. Theresa S. Cho & Donald C. Hambrick, 2006. "Attention as the Mediator Between Top Management Team Characteristics and Strategic Change: The Case of Airline Deregulation," Organization Science, INFORMS, vol. 17(4), pages 453-469, August.
    36. Maria del García-de los Salmones & Angel Herrero & Patricia Martínez, 2021. "Determinants of Electronic Word-of-Mouth on Social Networking Sites About Negative News on CSR," Journal of Business Ethics, Springer, vol. 171(3), pages 583-597, July.
    37. Jenna J. Burke, 2022. "Do Boards Take Environmental, Social, and Governance Issues Seriously? Evidence from Media Coverage and CEO Dismissals," Journal of Business Ethics, Springer, vol. 176(4), pages 647-671, April.
    38. Hongquan Chen & Saixing Zeng & Han Lin & Hanyang Ma, 2017. "Munificence, Dynamism, and Complexity: How Industry Context Drives Corporate Sustainability," Business Strategy and the Environment, Wiley Blackwell, vol. 26(2), pages 125-141, February.
    39. Kristina Haberstroh & Ulrich R. Orth & Stefan Hoffmann & Berit Brunk, 2017. "Consumer Response to Unethical Corporate Behavior: A Re-Examination and Extension of the Moral Decoupling Model," Journal of Business Ethics, Springer, vol. 140(1), pages 161-173, January.
    40. Jill R. Hough & Margaret A. White, 2003. "Environmental dynamism and strategic decision‐making rationality: an examination at the decision level," Strategic Management Journal, Wiley Blackwell, vol. 24(5), pages 481-489, May.
    41. Lu Zhang & Shenggang Ren & Xiaohong Chen & Dayuan Li & Duanjinyu Yin, 2020. "CEO Hubris and Firm Pollution: State and Market Contingencies in a Transitional Economy," Journal of Business Ethics, Springer, vol. 161(2), pages 459-478, January.
    42. Grappi, Silvia & Romani, Simona & Bagozzi, Richard P., 2013. "Consumer response to corporate irresponsible behavior: Moral emotions and virtues," Journal of Business Research, Elsevier, vol. 66(10), pages 1814-1821.
    43. Siew − Peng Lee, 2021. "Environmental responsibility, CEO power and financial performance in the energy sector," Review of Managerial Science, Springer, vol. 15(8), pages 2407-2426, November.
    44. He, Feng & Du, Hanyu & Yu, Bo, 2022. "Corporate ESG performance and manager misconduct: Evidence from China," International Review of Financial Analysis, Elsevier, vol. 82(C).
    45. Shihping Kevin Huang, 2013. "The Impact of CEO Characteristics on Corporate Sustainable Development," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 20(4), pages 234-244, July.
    46. Gillan, Stuart L. & Koch, Andrew & Starks, Laura T., 2021. "Firms and social responsibility: A review of ESG and CSR research in corporate finance," Journal of Corporate Finance, Elsevier, vol. 66(C).
    47. Aerts, Walter & Cormier, Denis & Magnan, Michel, 2006. "Intra-industry imitation in corporate environmental reporting: An international perspective," Journal of Accounting and Public Policy, Elsevier, vol. 25(3), pages 299-331.
    48. Waymond Rodgers & Arne Söderbom & Andrés Guiral, 2015. "Corporate Social Responsibility Enhanced Control Systems Reducing the Likelihood of Fraud," Journal of Business Ethics, Springer, vol. 131(4), pages 871-882, November.
    49. Johnson, Homer H., 2003. "Does it pay to be good? Social responsibility and financial performance," Business Horizons, Elsevier, vol. 46(6), pages 34-40.
    50. Christopher Marquis & Cuili Qian, 2014. "Corporate Social Responsibility Reporting in China: Symbol or Substance?," Organization Science, INFORMS, vol. 25(1), pages 127-148, February.
    51. Marta Riera & María Iborra, 2017. "Corporate social irresponsibility: review and conceptual boundaries," European Journal of Management and Business Economics, Emerald Group Publishing Limited, vol. 26(2), pages 146-162, July.
    52. Zeki Simsek, 2007. "CEO tenure and organizational performance: an intervening model," Strategic Management Journal, Wiley Blackwell, vol. 28(6), pages 653-662, June.
    53. Amir Barnea & Amir Rubin, 2010. "Corporate Social Responsibility as a Conflict Between Shareholders," Journal of Business Ethics, Springer, vol. 97(1), pages 71-86, November.
    54. Won-Yong Oh & Young Kyun Chang & Zheng Cheng, 2016. "When CEO Career Horizon Problems Matter for Corporate Social Responsibility: The Moderating Roles of Industry-Level Discretion and Blockholder Ownership," Journal of Business Ethics, Springer, vol. 133(2), pages 279-291, January.
    55. Mi‐Hee Lim & Jee Yong Chung, 2021. "The effects of female chief executive officers on corporate social responsibility," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 42(5), pages 1235-1247, July.
    56. Manuel Arellano & Stephen Bond, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 58(2), pages 277-297.
    57. Olivier Boiral, 2007. "Corporate Greening Through ISO 14001: A Rational Myth?," Organization Science, INFORMS, vol. 18(1), pages 127-146, February.
    58. Gilberto Marquez-Illescas & Allan A. Zebedee & Linying Zhou, 2019. "Hear Me Write: Does CEO Narcissism Affect Disclosure?," Journal of Business Ethics, Springer, vol. 159(2), pages 401-417, October.
    59. Julian F. Kölbel & Timo Busch & Leonhardt M. Jancso, 2017. "How Media Coverage of Corporate Social Irresponsibility Increases Financial Risk," Strategic Management Journal, Wiley Blackwell, vol. 38(11), pages 2266-2284, November.
    60. Musteen, Martina & Barker III, Vincent L. & Baeten, Virginia L., 2006. "CEO attributes associated with attitude toward change: The direct and moderating effects of CEO tenure," Journal of Business Research, Elsevier, vol. 59(5), pages 604-612, May.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Al-Shaer, Habiba & Uyar, Ali & Kuzey, Cemil & Karaman, Abdullah S., 2023. "Do shareholders punish or reward excessive CSR engagement? Moderating effect of cash flow and firm growth," International Review of Financial Analysis, Elsevier, vol. 88(C).
    2. Al-Shammari, Marwan & Rasheed, Abdul & Al-Shammari, Hussam A., 2019. "CEO narcissism and corporate social responsibility: Does CEO narcissism affect CSR focus?," Journal of Business Research, Elsevier, vol. 104(C), pages 106-117.
    3. Jeong, Nara & Kim, Nari & Arthurs, Jonathan D., 2021. "The CEO’s tenure life cycle, corporate social responsibility and the moderating role of the CEO’s political orientation," Journal of Business Research, Elsevier, vol. 137(C), pages 464-474.
    4. Jin‐Ki Hong & Ji‐Hwan Lee & Taewoo Roh, 2022. "The effects of CEO narcissism on corporate social responsibility and irresponsibility," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 43(6), pages 1926-1940, September.
    5. Bu, Luofan & Chan, Kam C. & Choi, Ahrum & Zhou, Gaoguang, 2021. "Talented inside directors and corporate social responsibility: A tale of two roles," Journal of Corporate Finance, Elsevier, vol. 70(C).
    6. Marko Reimer & Sebastiaan Doorn & Mariano L. M. Heyden, 2018. "Unpacking Functional Experience Complementarities in Senior Leaders’ Influences on CSR Strategy: A CEO–Top Management Team Approach," Journal of Business Ethics, Springer, vol. 151(4), pages 977-995, September.
    7. José‐Luis Godos‐Díez & Laura Cabeza‐García & Roberto Fernández‐Gago & Mariano Nieto‐Antolín, 2020. "Does CEO media exposure affect corporate social responsibility?," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 27(2), pages 825-840, March.
    8. Isabel‐María García‐Sánchez & Beatriz Aibar‐Guzmán & Cristina Aibar‐Guzmán & Tânia‐Cristina Azevedo, 2020. "CEO ability and sustainability disclosures: The mediating effect of corporate social responsibility performance," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 27(4), pages 1565-1577, July.
    9. García-Meca, Emma & Ramón-Llorens, Maria-Camino & Martínez-Ferrero, Jennifer, 2021. "Are narcissistic CEOs more tax aggressive? The moderating role of internal audit committees," Journal of Business Research, Elsevier, vol. 129(C), pages 223-235.
    10. Ahlem Dabbebi & Naima Lassoued & Imen Khanchel, 2022. "Peering through the smokescreen: ESG disclosure and CEO personality," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 43(7), pages 3147-3164, October.
    11. Qiao, Penghua & Long, Yang & Fung, Hung-Gay & Kao, Erin Hui-Chuan, 2022. "Narcissistic leaders and corporate cash Holdings: Evidence in China," The North American Journal of Economics and Finance, Elsevier, vol. 59(C).
    12. María Iborra & Marta Riera, 2023. "Corporate social irresponsibility: What we know and what we need to know," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 30(3), pages 1421-1439, May.
    13. Zhaocheng Xu & Jingchuan Hou, 2021. "Effects of CEO Overseas Experience on Corporate Social Responsibility: Evidence from Chinese Manufacturing Listed Companies," Sustainability, MDPI, vol. 13(10), pages 1-24, May.
    14. Shahid Ali & Junrui Zhang & Muhammad Usman & Muhammad Kaleem Khan & Farman Ullah Khan & Muhammad Abubakkar Siddique, 2020. "Do tournament incentives motivate chief executive officers to be socially responsible?," Managerial Auditing Journal, Emerald Group Publishing Limited, vol. 35(5), pages 597-619, February.
    15. Anita Mendiratta & Shveta Singh & Surendra Singh Yadav & Arvind Mahajan, 2023. "Bibliometric and Topic Modeling Analysis of Corporate Social Irresponsibility," Global Journal of Flexible Systems Management, Springer;Global Institute of Flexible Systems Management, vol. 24(3), pages 319-339, September.
    16. Jiatao Li & Haoyuan Ding & Yichuan Hu & Guoguang Wan, 2021. "Dealing with dynamic endogeneity in international business research," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 52(3), pages 339-362, April.
    17. Minji Kim & Tohyun Kim, 2020. "When Do CEOs Engage in CSR Activities? Performance Feedback, CEO Ownership, and CSR," Sustainability, MDPI, vol. 12(19), pages 1-13, October.
    18. Anita, Mendiratta & Shveta, Singh & Yadav Surendra, S. & Arvind, Mahajan, 2023. "When do ESG controversies reduce firm value in India?," Global Finance Journal, Elsevier, vol. 55(C).
    19. Byun, Kyung-Ah (Kay) & Al-Shammari, Marwan, 2021. "When narcissistic CEOs meet power: Effects of CEO narcissism and power on the likelihood of product recalls in consumer-packaged goods," Journal of Business Research, Elsevier, vol. 128(C), pages 45-60.
    20. Fabrizio Rossi & Maretno Agus Harjoto, 2020. "Corporate non-financial disclosure, firm value, risk, and agency costs: evidence from Italian listed companies," Review of Managerial Science, Springer, vol. 14(5), pages 1149-1181, October.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:riibaf:v:69:y:2024:i:c:s0275531924000771. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/ribaf .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.