Narcissistic leaders are bad for share value, unless they are seen to stimulate innovation and growth at companies suffering from corporate inertia, according to research which analysed how CEO narcissism affects stock recommendations from securities analysts.
The study by Nottingham Business School, Middle Tennessee State University, and the University of Leeds is the first to explore the relationship between CEOs who are linked to excessive risk taking and their value to a company.
Securities analysts provide investors with performance forecasts and recommendations on the attractiveness of investing in company stock. Existing research has shown that these recommendations can affect a company’s market performance by influencing the price people are willing to pay for the company’s shares.
The study analysed data from the Standard & Poor (S&P) 100 index and covered 75 CEOs from 66 S&P 100 firms over a ten-year period. Researchers adopted widely used unobtrusive methods to measure narcissistic tendencies, including those that are under the CEO’s control along with aspects of narcissistic personalities such as arrogance, entitlement, and self-absorption.
This included exploring the use of photos in annual reports, first-person singular pronouns in shareholder letters, and cash and non-cash compensation compared to the second-highest paid executives.
The research also
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