The Impact of CEO Narcissism on Firm Risk

Purpose: Traditional financial theories are largely grounded in the assumption that investors and managers behave in a fully rational manner. In contrast, behavioral finance rejects this assumption and emphasizes evidence-based behavior shaped by psychological elements. These emerging perspectives highlight the role of cognitive biases and individual characteristics in shaping financial decisions. Among these traits, managerial narcissism can significantly influence decision-making. Narcissistic CEOs often demonstrate a tendency toward risk-taking, focusing on short-term goals without sufficient regard for long-term consequences, which in turn exposes organizations to greater risks. Accordingly, this study aims to investigate the impact of CEO narcissism on firm risk among companies listed on the Tehran Stock Exchange. Method: The study sample comprises ۷۹ firms listed on the Tehran Stock Exchange over the period ۲۰۱۶–۲۰۲۱. A multivariate regression model with panel data and ordinary least squares (OLS) estimation was employed to test the research hypotheses. CEO narcissism was measured using two proxies: (۱) the ratio of cash compensation to total remuneration, and (۲) the size of the CEO’s signature. Findings: The results indicate that, regardless of the measurement criterion, CEO narcissism has a positive and significant effect on firm risk. Conclusion: Narcissistic CEOs, driven by excessive risk-taking tendencies and insistence on their decisions, often engage in actions that create considerable challenges within organizations and threaten their long-term success and survival. Overall, the findings suggest that CEO narcissism increases firms’ overall risk exposure.

کلیدواژه ها:

Narcissism ، Firm Risk ، Behavioral Finance ، CEO