The Equilibrium Assignment of Narcissistic CEOs to Firms

37 Pages Posted: 19 Feb 2015 Last revised: 3 Oct 2015

See all articles by Eric de Bodt

Eric de Bodt

NHH-Caltech

Helen Bollaert

SKEMA Business School

Pascal Grandin

SKEMA Business School - Lille Campus

Richard Roll

California Institute of Technology

Date Written: February 18, 2015

Abstract

Firms may rationally select CEOs whose level of narcissism is compatible with their circumstances. We model the firm-CEO matching process in which narcissistic CEOs are matched to firms characterized by their shareholders’ risk aversion. This leads us to predict that (i) contemporaneous (future) CEO narcissism is increasing (decreasing) in the compensation package; (ii) CEO narcissism is decreasing in shareholder risk aversion and (iii) CEO narcissism is increasing in CEO narcissism mean reversion. We test our predictions on a 10-year sample of S&P 500 CEOs, using a time-varying measure of CEO narcissism. Our empirical results provide preliminary support for all our predictions.

Keywords: CEO narcissism, compensation, governance

JEL Classification: G30, G34

Suggested Citation

de Bodt, Eric and Bollaert, Helen and Grandin, Pascal and Roll, Richard W., The Equilibrium Assignment of Narcissistic CEOs to Firms (February 18, 2015). Paris December 2015 Finance Meeting EUROFIDAI - AFFI. Available at SSRN: https://ssrn.com/abstract=2566708 or http://dx.doi.org/10.2139/ssrn.2566708

Eric De Bodt

NHH-Caltech ( email )

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HOME PAGE: http://www.edebodt.eu

Helen Bollaert (Contact Author)

SKEMA Business School ( email )

Avenue Willy Brandt
Euralille, 59777
France

Pascal Grandin

SKEMA Business School - Lille Campus ( email )

Avenue Willy Brandt, Euralille
Lille, 59020
France

Richard W. Roll

California Institute of Technology ( email )

1200 East California Blvd
Mail Code: 228-77
Pasadena, CA 91125
United States
626-395-3890 (Phone)
310-836-3532 (Fax)

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