CFO Narcissism and the Power of Persuasion Over Analysts: A Mixed-Methods Approach

Abstract

We study the role of CFO narcissism in the intent and ability to positively influence sell-side analysts’ perceptions of the firm. Consistent with narcissists casting favorable impressions on others, we find CFO narcissism is associated with overly optimistic analyst valuations. We then study public persuasion attempts by analyzing conference call transcripts and private persuasion attempts through a laboratory study. In the conference call setting, we provide evidence that narcissistic CFOs use more persuasive language and are more inclined to call on bearish analysts, both of which we link to higher price targets. In the lab study, we simulate a one-on-one conversation and find that narcissists are especially more likely to use coercive methods to induce higher valuations (e.g., threatening to remove private lines of communication). Collectively, we provide evidence that narcissistic CFOs exercise persuasion tactics to favorably influence analysts’ perceptions of firm value.

Keywords: Executive Narcissism, Persuasion, Sell-Side Analysts

JEL Classification: G24, G30, G41