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Do narcissistic CEOs rock the boat?

Author

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  • Tom Aabo
  • Frederik Hoejland
  • Jesper Pedersen

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.

Suggested Citation

  • Tom Aabo & Frederik Hoejland & Jesper Pedersen, 2020. "Do narcissistic CEOs rock the boat?," Review of Behavioral Finance, Emerald Group Publishing Limited, vol. 13(2), pages 141-164, April.
    • Handle: RePEc:eme:rbfpps:rbf-09-2019-0118
    DOI: 10.1108/RBF-09-2019-0118
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