Is CEO Narcissism Beneficial or Detrimental for Firm Performance? Insights from a Meta-Analysis

Abstract

Although upper echelon research on CEO narcissism has rapidly grown in the past decade, the influence of narcissistic CEOs on firm performance is subject to a controversial discussion in the literature. To help resolving this debate, this study proposes that the distinct views and equivocal empirical findings in prior research might stem from important yet overlooked risky strategic decisions made by narcissistic CEOs that help to explain their distinct effects on firm performance. Building on 68 studies, results from meta-analytical structural equation modeling (MASEM) reveal that whether narcissistic CEOs are beneficial or detrimental for firm performance depends on the risky strategic actions they pursue. The results uncover that narcissistic CEOs may have beneficial effects on firm performance through stimulating innovation. However, these positive effects are likely to be offset by the negative strategic actions of those CEOs, such as spurring leveraged financial capital structures. Interestingly, the results further highlight that, while the upsides of narcisstic CEOs for firm performance through stimulating innovation increase in high managerial discretion contexts, their greater leeway enhances their downsides even more, so that they do not only offset the benefits of narcissistic CEOs, but rather ultimately lead to detrimental effects for firm performance. This study thus helps to advance the discussion about narcissistic CEOs by theorizing and empirically demonstrating that the relationship between CEO narcissism and performance is more complex than previously depicted and requires a more nuanced investigation of the underlying mechanisms – research which has, so far, been conducted in parallel research streams.