Sometimes, We Do Need a Narcissist
Karynne Turner, Feray Adigüzel, and Jatinder S Sidhu reflect on their research article, “Chief executive officer narcissism, corporate inertia, and securities analysts’ stock recommendations,” published in Strategic Organization. Their reflection can be found below the paper’s abstract.
The narcissism of chief executive officers is attracting much research interest because of its potential effects on the strategic decisions, financial performance, and competitive standing of firms. This article addresses a significant gap in the literature by analyzing the effect of chief executive officer narcissism on security analysts’ stock recommendations. As financial-market intermediaries between firms and investors, analysts are an important corporate-governance actor, whose stock recommendations are consequential for the market value of a firm. Drawing on the idea of observers’ implicit leadership theories, we argue that greater chief executive officer narcissism will predict lower analysts’ stock recommendations because narcissistic chief executive officers’ penchant for risk-taking will lead analysts to categorize them as ineffective leaders. We argue further that signals of corporate inertia conveyed by the age, size, and reputation of firms will positively moderate the chief executive officer narcissism–analysts’ stock recommendation relationship, because analysts will expect inertia to be offset by narcissistic chief executive officers’ risk-taking, a dynamic likely to improve firm performance. US panel data provide support for the theorized chief executive officer narcissism–analysts’ stock recommendations relationship and indicates significant moderation effects of the reputation and size of firms. The article discusses the study’s contributions and implications for research and practice.
The motivation for this research was hearing the word “narcissism” being used abundantly during the 2016 US presidential election cycle. After the election, we had heard from people in the US and around the world that the results of the US election meant the Chancellor of Germany, at that time Angela Merkel, was now the leader of the Free World. We were amazed by how quickly the US standing and reputation as a world leader had dissipated because of someone viewed as being highly narcissistic taking the helm of the US federal government. We were curious to know if narcissistic CEOs would have a similar negative effect on the companies they led. After investigating the research on narcissism, we discovered that the literature was equivocal about the effects of narcissistic CEOs.
Narcissistic CEOs are viewed as innovative and risk-taking and thus, could lead their firms to higher growth, but narcissistic CEOs are also perceived as overly risk-taking and could lead their firms to fluctuating performance. We wanted to understand under what circumstances a narcissistic CEO could be viewed favorably for a firm. What makes our research innovative is that we are exploring the answer to that question – when is it okay to have a narcissistic CEO? Our research suggests that, in general, narcissistic CEOs are damaging to their firms’ stock assessments in terms of analysts’ recommendations and even more damaging for larger firms. However, narcissistic CEOs propensity to go against the status quo is useful for firms encumbered by inertia. The study provides new insights relevant for the management and governance of firms.
