Abstract
Clinically-established defining characteristics of narcissists suggest CEO narcissism likely impacts firm value through human capital channels. Consistent with classic narcissist traits of undervaluing people and lacking empathy influencing CEO decisions, we find narcissistic CEOs are more likely to initiate layoffs, do so after less severe downturns in performance, and put less weight on potential human capital losses when making layoff decisions. Event study results imply narcissistic CEOs destroy value through suboptimal layoff decisions in high human capital intensity industries. Defining characteristics of narcissism also suggest CEO narcissism likely impacts firm value through an executive human capital channel. We find turnover of non-CEO executives with pay closer to their CEO’s is greater under narcissistic CEOs, and stock price reactions to these departures are more negative the longer their tenure. Event study results for CEO departures imply a negative net impact of CEO narcissism on firm value through both human capital channels.
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