The Impact of CEO Narcissism on Earnings Management

We provide the first empirical test of the relation between CEO narcissism and earnings manipulation. We test the hypothesis that narcissistic leaders over‐identify themselves with the organizations they lead and expend considerable effort to achieve their goals, including by engaging in unethical b...

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Bibliographic Details
Published in:Abacus (Sydney) 2018-06, Vol.54 (2), p.210-226
Main Authors: Capalbo, Francesco, Frino, Alex, Lim, Ming Ying, Mollica, Vito, Palumbo, Riccardo
Format: Article
Language:English
Subjects:
Chief executive officer
Chief executive officers
Chief executives
Earnings
Earnings announcements
Earnings management
Ethics
Manipulation
Narcissism
Performance evaluation
Personality
Pronouns
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Summary:We provide the first empirical test of the relation between CEO narcissism and earnings manipulation. We test the hypothesis that narcissistic leaders over‐identify themselves with the organizations they lead and expend considerable effort to achieve their goals, including by engaging in unethical behaviour. Earnings announcements are highly anticipated information releases by organizations. They are a key performance indicator used to evaluate the performance of CEOs. This study examines the use of first person singular pronouns by CEOs in response to questions at analyst conferences to measure narcissism. We provide evidence that firms with narcissistic CEOs engage in accruals management to manage earnings positively, highlighting the important effect of CEO personality on accounting choices.
ISSN:0001-3072
1467-6281
DOI:10.1111/abac.12116