The beguiling behaviour of narcissistic CEOs: Evidence from repurchase announcements

We study whether Chief Executive Officer (CEO) narcissism affects a firm's share repurchase announcements and their implementations. Using signature characteristics as a measure of narcissism, we find that US firms with narcissist CEOs are more likely to make repurchase announcements and announ...

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Bibliographic Details
Published in:Journal of business finance & accounting 2024-03, Vol.51 (3-4), p.717-755
Main Authors: Boamah, Evans O., Banerjee, Shantanu
Format: Article
Language:English
Subjects:
Announcements
CEO duality
CEO narcissism
Chief executive officers
Chief executives
Companies
Governance
Narcissism
price trends
Securities buybacks
share repurchases
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Summary:We study whether Chief Executive Officer (CEO) narcissism affects a firm's share repurchase announcements and their implementations. Using signature characteristics as a measure of narcissism, we find that US firms with narcissist CEOs are more likely to make repurchase announcements and announce higher repurchase dollar amounts. However, these firms are less likely to follow through. Actual repurchases by these firms are less frequent, and they use a smaller amount of cash for share buyback because they have a higher cashflow sensitivity of cash. Narcissist CEOs’ repurchase announcements are less driven by market timing and have a lower announcement effect compared to those by other CEOs. The higher rate and amount of repurchase announcements are more pronounced in poorly governed firms with narcissistic CEOs. These results are robust to various specifications including a difference‐in‐difference set‐up using CEOs’ exogenous turnover, controlling for other CEO traits and using an alternative measure of narcissism based on pronoun usage in CEO communications. Collectively, the results presented in this study demonstrate that narcissist CEOs play a critical role in the intensity of share repurchase announcements and their executions, particularly for firms with weaker governance structures.
ISSN:0306-686X
1468-5957
DOI:10.1111/jbfa.12796