The study, "CEO Narcissism and Accounting: A Picture of Profits," published in
"Certain traits of narcissists, such as charisma and risk-taking, can make them successful leaders. They are innovative and committed to action," said Young. "These qualities could be critical factors in helping their companies succeed and have higher EPS and stock price. But when other facets of narcissism, such as vanity and exhibitionism, are present, a positive impact is less likely."
Researchers studied the accounting-related outcomes of 283 CEOs from 235 unique Fortune 500 firms from 1992-2009. Narcissistic CEOs were identified through a composite score based on the size and composition of the CEO's photograph in the annual report and the CEO's relative and non-relative cash pay benefits to that of the next highest company executive. The more prominent the photo and the greater the discrepancy in benefits, the more strongly the CEOs were identified as narcissistic leaders.
Researchers examined the relationship between CEO narcissism and earnings-per-share, the company's most visible accounting number, and share price, to which CEO compensation usually is tied. Results indicate that companies headed by narcissistic CEOs had higher EPS after controlling for factors related to the CEO, firm and industry. These CEOs achieved this partially through real activities manipulations that increase EPS.
"Narcissistic CEOs make operational decisions such as lenient credit terms, sales discounts and overproduction that in the short term boost earnings," said Young.
"However, this behavior can be detrimental to a company in the long-term. Our research shows a positive impact of higher earnings-per-share and stock price, but that 'positive' may come at a high cost."
Keywords for this news article include: Finance and Investment, Investment and Finance,
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