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

Posted: 30 Aug 2017

See all articles by Charles (Chad) Ham

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

Southern Methodist University (SMU) - Accounting Department

Multiple version iconThere are 2 versions of this paper

Date Written: August 2017

Abstract

Using the size of CEO signatures in SEC filings to measure individual narcissism, we find that CEO narcissism 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 and the firm’s investment policies and performance. CEO narcissism is associated with over investment, particularly in R&D and M&A expenditures (but not in 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: G30, G40, M10, M40

Suggested Citation

Ham, Charles and Seybert, Nicholas and Wang, Sean, Narcissism Is a Bad Sign: CEO Signature Size, Investment, and Performance (August 2017). Review of Accounting Studies, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3026541

Charles Ham (Contact Author)

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

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

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

Sean Wang

Southern Methodist University (SMU) - Accounting Department ( email )

United States
2147682858 (Phone)

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