Research output: Contribution to journal/Conference contribution in journal/Contribution to newspaper › Journal article › Research › peer-review
Accepted manuscript, 568 KB, PDF document
Final published version
Purpose: The purpose of this paper is to investigate the association between CEO narcissism and corporate risk taking. Design/methodology/approach: The authors provide a novel and unobtrusive measure of CEO narcissism based on LinkedIn profiling. The authors investigate the relationship between CEO narcissism and corporate risk taking (stock return volatility) for a sample of 475 US manufacturing firms in the period 2010-2014. Findings: The authors find an inverse U-shape relationship between CEO narcissism and stock return volatility. The inverse U-shape relationship (the “humpback”) is caused by the paradoxical nature of the narcissistic personality in which the self-esteem is high but at the same time fragile with a combination of self-admiration and a constant need of having this positive self-view confirmed. The results are robust to alternative specifications of CEO narcissism and corporate risk taking. The results are economically meaningful. Thus, a moderate degree of CEO narcissism – as compared to a very low or a very high level of CEO narcissism – is associated with an increase in corporate risk taking of approximately 12 percent. Originality/value: Previous literature provides multiple analyses on the association between managerial overconfidence and corporate decisions. As opposed to overconfidence, narcissism is a personality trait having both cognitive and behavioral dimensions. This paper provides a novel contribution to the growing literature on the association between managerial biases/traits and corporate decision-making.
Original language | English |
---|---|
Journal | Review of Behavioral Finance |
Volume | 10 |
Issue | 3 |
Pages (from-to) | 252-273 |
Number of pages | 22 |
ISSN | 1940-5979 |
DOIs | |
Publication status | Published - 2018 |
See relations at Aarhus University Citationformats
ID: 130996173