Narcissism Is a Bad Sign: CEO Signature Size, Investment, and Performance

Posted: 10 Sep 2012 Last revised: 21 Apr 2017

Charles (Chad) Ham

Washington University in St. Louis - John M. Olin Business School

Nicholas Seybert

University of Maryland - Department of Accounting & Information Assurance

Sean Wang

University of North Carolina - Kenan-Flagler Business School

Abstract

Using the size of CEO signatures in SEC filings to measure individual narcissism, we find that it is associated with several negative firm outcomes. We first validate signature size as a measure of narcissism but not overconfidence using two laboratory studies, and also find that our measure is correlated with employee perceptions of CEO narcissism used in prior research. We then use CEO signatures to study the relation between CEO narcissism, the firm’s investment policies, and firm performance. CEO narcissism is associated with overinvestment, particularly in the form of R&D and M&A expenditures, but not capital expenditures. Firms led by narcissistic CEOs experience lower financial productivity in the form of profitability and operating cash flows. Despite this negative performance, narcissistic CEOs enjoy higher absolute and relative compensation. Our results are robust to several alternative specifications, including controlling for a popular options-based overconfidence measure used in prior research.

Keywords: CEO narcissism, signature size, firm investment, firm performance, CEO compensation

JEL Classification: M10, M40, G30

Suggested Citation

Ham, Charles (Chad) and Seybert, Nicholas and Wang, Sean, Narcissism Is a Bad Sign: CEO Signature Size, Investment, and Performance. UNC Kenan-Flagler Research Paper No. 2013-1. Available at SSRN: https://ssrn.com/abstract=2144419 or http://dx.doi.org/10.2139/ssrn.2144419

Charles Ham

Washington University in St. Louis - John M. Olin Business School ( email )

One Brookings Drive
Campus Box 1133
St. Louis, MO 63130-4899
United States

Nicholas Seybert (Contact Author)

University of Maryland - Department of Accounting & Information Assurance ( email )

Robert H. Smith School of Business
College Park, MD 20742-9157
United States

Sean Wang

University of North Carolina - Kenan-Flagler Business School ( email )

McColl Building
Chapel Hill, NC 27599-3490
United States

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