Skip to content

Narcissistic CEOs are bad for share value but good for company inertia

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.

    Futuristic business concept with images of business people and icon of investment and value
    Securities analysts were shown to release weaker stock recommendations for companies with narcissistic CEOs

    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.

    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.

    Feray Adiguzel staff profile image
    Dr Feray Adıgüzel, senior lecturer in marketing at Nottingham Business School

    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 looked at whether firm age, size and reputation were mitigating factors against the impact of CEO narcissism, as well as taking into account variables which may affect securities analyst recommendations, including CEO age and tenure, and return on assets, shareholder returns, R&D intensity and institutional ownership of stock.

    Narcissistic CEOs were shown to have a negative impact on recommendations, with analysts issuing weaker stock recommendations. This was especially so for larger firms where narcissistic leadership could clash with bureaucracy.

    However, the findings also revealed that securities analysts will announce less pessimistic stock recommendations when the firm has an established reputation and appears to be prone to corporate inertia, signalling that they believe a brash leadership style and inclination towards risk-taking could improve its performance by stimulating change and innovation.

    Dr Feray Adıgüzel, senior lecturer in marketing at Nottingham Business School, part of Nottingham Trent University, said: “Previous research has focused on the firm level consequences of a narcissistic leaders. Our study is one a few that considers their impact on external parties - in this case securities analysts, whose expectations and predictions can have an adverse effect on the legitimacy of a company in financial markets.

    “While there are some mitigating circumstances, overall securities analysts do not consider CEO narcissism to be of value to a company and this can have an impact on its strategy and performance. This reinforces the view that narcissism as a CEO personality trait has downsides and underlines the importance of being mindful when boards appoint, monitor and reward a CEO – as many leaders with this trait may lack self-awareness and do not have the necessary oversight to protect the company from its harmful consequences.

    “This task seems especially urgent now, at a time of great expectations regarding the role well-led companies and institutions can play in tackling the grand challenges society currently faces.”

    The paper Chief executive officer narcissism, corporate inertia, and securities analysts’ stock recommendations has been published in the journal Strategic Organisation.

    • Notes for editors

      Press enquiries please contact Helen Breese, Public Relations Manager, on telephone +44 (0)115 848 8751, or via email.

      About Nottingham Business School at Nottingham Trent University

      Nottingham Business School (NBS) at Nottingham Trent University (NTU) is a leader in experiential learning and personalisation of business, management and economics education and research, combining academic excellence with positive impact on people, business and society.  NBS has an unrivalled level of engagement with business, public and voluntary organisations. With more than 8,500 students, NBS is also one of UK’s largest business schools.

      NBS is Quadruple+ Accredited by EQUIS, AACSB, EFMD BA for International Business, which are globally recognised hallmarks of excellence and quality for business education. NBS is also accredited by Small Business Charter, providing support and development for SMEs. The school is also a PRME Champion and held up as an exemplar and beacon by the United Nations Principles of Responsible Management Education (PRME).

      About Nottingham Trent University

      Nottingham Trent University (NTU) received the Queen’s Anniversary Prize for Higher and Further Education in 2021 for cultural heritage science research. It is the second time that NTU has been bestowed the honour of receiving a Queen’s Anniversary Prize for its research, the first being in 2015 for leading-edge research on the safety and security of global citizens.

      The Research Excellence Framework (2021) classed 83% of NTU’s research activity as either world-leading or internationally excellent. 86% of NTU’s research impact was assessed to be either world-leading or internationally excellent.

      NTU was awarded The Times and The Sunday Times Modern University of the Year 2023 and ranked University of the Year in the Whatuni Student Choice Awards 2023. It was awarded Outstanding Support for Students 2020 (Times Higher Education Awards), University of the Year 2019 (Guardian University Awards, UK Social Mobility Awards), Modern University of the Year 2018 (Times and Sunday Times Good University Guide) and University of the Year 2017 (Times Higher Education Awards).

      NTU is the 5th largest UK institution by student numbers, with approximately 40,000 students and more than 4,400 staff located across five campuses. It has an international student population of 7,000 and an NTU community representing over 160 countries.

      Since 2000, NTU has invested £570 million in tools, technology, buildings and facilities.

      NTU is in the UK’s top 10 for number of applications and ranked first for accepted offers (2021 UCAS UG acceptance data). It is also among the UK’s top five recruiters of students from disadvantaged backgrounds and was the first UK university to sign the Social Mobility Pledge.

      NTU is ranked the second most sustainable university in the world in the 2022 UI Green Metric University World Rankings (out of more than 900 participating universities).

    Published on 30 January 2024
    • Category: Press office; Research; Nottingham Business School