CEOs’ Narcissism and Opportunistic Insider Trading

48 Pages Posted: 7 Aug 2023

See all articles by Cheng "Jason" Jiang

Cheng "Jason" Jiang

Boston College

Kose John

New York University (NYU) - Leonard N. Stern School of Business

J.H. John Kim

College of Charleston

Jingyu Zhang

Queen's University - Smith School of Business

Date Written: August 3, 2023

Abstract

Narcissism is a multifaceted personality trait that profoundly influences individuals' cognition, emotions, and actions. This study investigates the relationship between narcissistic CEOs and their engagement in opportunistic insider trading. Utilizing a quantitative measure of CEOs’ narcissism derived from textual analysis, we find that CEOs with a higher level of narcissism engage in opportunistic insider trading more intensely, thereby supporting the hypothesis of exploitative personal benefit. To mitigate concerns of endogeneity, we employ various rigorous approaches, including matching, instrumental variable, Heckman’s two-step sample selection model, and falsification tests. Through cross-sectional analysis, we find that the impact of CEOs’ narcissism on opportunistic insider trading is more pronounced among CEOs with limited legal knowledge and weaker monitoring pressure. Collectively, our findings highlight narcissism as a significant personality trait that drives CEOs’ opportunistic insider trading behaviors, contributing to a deeper understanding of corporate governance dynamics.

Keywords: CEO, narcissism, insider trading

JEL Classification: G14, G30, M12

Suggested Citation

Jiang, Cheng and John, Kose and Kim, J.H. John and Zhang, Jingyu, CEOs’ Narcissism and Opportunistic Insider Trading (August 3, 2023). Available at SSRN: https://ssrn.com/abstract=4531082 or http://dx.doi.org/10.2139/ssrn.4531082

Cheng Jiang (Contact Author)

Boston College ( email )

140 Commonwealth Avenue
Chestnut Hill, MA 02467
United States

Kose John

New York University (NYU) - Leonard N. Stern School of Business ( email )

J.H. John Kim

College of Charleston ( email )

66 George Street
Charleston, SC 29424
United States

Jingyu Zhang

Queen's University - Smith School of Business ( email )

Goodes Hall
143 Union Street
Kingston, Ontario K7L 3N6
Canada

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