Me, Myself and I: CEO Narcissism and Selective Hedging

33 Pages Posted: 16 Oct 2019

See all articles by Emanuele Bajo

Emanuele Bajo

University of Bologna - Department of Economics

Håkan Jankensgård

Lund University - Department of Business Administration; Knut Wicksell Centre for Financial Studies

Nicoletta Marinelli

University of Macerata - Department of Economics and Law

Date Written: October 7, 2019

Abstract

In this paper, we test the hypothesis that CEO narcissism influences firms’ hedging behaviour. Unlike rare but transformative events like acquisitions, derivative usage offers the narcissistic manager a convenient stage for bold and decisive action that generates a continuous supply of attention. It therefore represents a compelling setting for investigating whether narcissism impacts corporate policies. The empirical evidence, based on hand-collected data on derivative positions in the U.S. oil and gas industry, suggests that firms with a narcissistic CEO hedge more selectively. Furthermore, we also find that these firms reduce selective hedging comparatively more following a sharp and unexpected price collapse that sent the industry into a state of distress. This result is in line with the ‘narcissistic paradox’: while scoring high on self-esteem and grandiosity in the normal case, such individuals are also inherently fragile and liable to crumble when faced with adversity.

Keywords: Risk management, derivatives, selective hedging, narcissism, upper echelon

JEL Classification: G30, G32

Suggested Citation

Bajo, Emanuele and Jankensgård, Håkan and Marinelli, Nicoletta, Me, Myself and I: CEO Narcissism and Selective Hedging (October 7, 2019). Available at SSRN: https://ssrn.com/abstract=3465457 or http://dx.doi.org/10.2139/ssrn.3465457

Emanuele Bajo

University of Bologna - Department of Economics ( email )

Bologna
Italy

Håkan Jankensgård (Contact Author)

Lund University - Department of Business Administration ( email )

Box 117
SE-221 00 Lund, S-220 07
Sweden

Knut Wicksell Centre for Financial Studies ( email )

Box 7080
Lund, SE-220 07
Sweden

Nicoletta Marinelli

University of Macerata - Department of Economics and Law ( email )

Piazza Strambi, 1
Macerata, Macerata 62100
Italy

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