CEO Narcissism, Human Capital, and Firm Value

60 Pages Posted: 29 Jul 2018 Last revised: 20 Sep 2021

See all articles by Shane A. Johnson

Shane A. Johnson

Texas A&M University - Department of Finance

Adam C. Kolasinski

Texas A&M University - Department of Finance

James Nordlund

affiliation not provided to SSRN

Date Written: September 29, 2020

Abstract

Clinically-established defining characteristics of narcissists suggest CEO narcissism likely
impacts firm value through human capital channels. Consistent with classic narcissist traits of
undervaluing people and lacking empathy influencing CEO decisions, we find narcissistic CEOs
are more likely to initiate layoffs, do so after less severe downturns in performance, and put less
weight on potential human capital losses when making layoff decisions. Event study results
imply narcissistic CEOs destroy value through suboptimal layoff decisions in high human capital
intensity industries. Defining characteristics of narcissism also suggest CEO narcissism likely
impacts firm value through an executive human capital channel. We find turnover of non-CEO
executives with pay closer to their CEO’s is greater under narcissistic CEOs, and stock price
reactions to these departures are more negative the longer their tenure. Event study results for
CEO departures imply a negative net impact of CEO narcissism on firm value through both
human capital channels.

Keywords: narcissism, executives, turnover, layoffs, human capital, behavioral finance

JEL Classification: M12, M51, M54, G40

Suggested Citation

Johnson, Shane A. and Kolasinski, Adam C. and Nordlund, James, CEO Narcissism, Human Capital, and Firm Value (September 29, 2020). Mays Business School Research Paper No. 3209882, Available at SSRN: https://ssrn.com/abstract=3209882 or http://dx.doi.org/10.2139/ssrn.3209882

Shane A. Johnson (Contact Author)

Texas A&M University - Department of Finance ( email )

Mays School of Business
College Station, TX 77843-4218
United States
979-862-3318 (Phone)

Adam C. Kolasinski

Texas A&M University - Department of Finance ( email )

360 Wehner
College Station, TX 77843-4218
United States

James Nordlund

affiliation not provided to SSRN

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