CEO Narcissism, Risk-Taking, and Resilience: An Empirical Analysis in U.S. Commercial Banks
By Tine Buyl, Christophe Boone, James B. Wade. 2019
320 citations recorded by the source corpus.
In this study, we investigate how CEO narcissism, in combination with corporate governance practices, impacts organizational risk-taking and how this in turn affects organizations’ resilience to environmental conditions. We examine these issues in the context of the recent collapse (systemic shock) of the U.S. banking industry in September 2008, using a sample of 92 CEOs from 2006 until 2014. We find that before the shock CEO narcissism positively affected the riskiness of banks’ policies, especially when compensation policies that encourage risk-taking (stock options) are in place. The positive effect of narcissism was dampened, however, when board monitoring was more effective (because of the presence of knowledgeable outsider directors). Furthermore, we find that these preshock features hamper organizations’ resilience to (economic) shocks, as banks led by more narcissistic CEOs before the September 2008 collapse experienced a slower recovery to preshock performance levels afterwards. This effect was partially mediated by banks’ preshock riskiness of policies. We attribute these effects to the associated depletion of the organizations’ internal resources (beyond slack). Post-hoc analyses further underscore this idea, showing that the U.S. government’s capital injections through the Troubled Assets Relief Program (TARP)—resolving the “problem” of resource depletion—moderated these effects.
Subfields: Accounting, Clinical Psychology
View Paper: https://www.semanticscholar.org/paper/47c9b9b6405233abe1c5737d3b3498db71d8ab7b
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Citations in the corpus
- Making CEO Narcissism Research Great: A Review and Meta-Analysis of CEO Narcissism (2019, unknown): “Narcissistic CEOs may increase their firm’s financial leverage to improve financial results, due to their tendency for overconfidence, risky decision making, and influencing or manipulating accounting numbers (Buyl et al., 2017; Capalbo et al., 2017).”
- “See You in Court”: How CEO narcissism increases firms' vulnerability to lawsuits (2017, background): “, 2015a), and also that CEOs who are highly narcissistic can cause negative consequences for the firms they lead (e.g., Blair et al., 2008; Buyl et al., 2017).”
- Strategic leadership in organizational crises: A review and research agenda (2021, background): “…only a few exceptions (König et al., 2020b), most studies focus on the roles of the related traits of CEO narcissism and overconfidence and highlight both positive (Patel and Cooper, 2014) and negative (Buyl et al., 2019; Ho et al., 2016; Kashmiri et al., 2017) effects on crisis-related outcomes.”