Abstract
Using the size of CEO signatures in SEC filings to measure individual narcissism, we find that it is associated with several negative firm outcomes. We first validate signature size as a measure of narcissism in a laboratory experiment. We then use CEO signatures to study the relation between CEO narcissism, the firm’s investment policies, and firm performance. CEO narcissism is associated with overinvestment, particularly in the form of R&D and M&A expenditures, but not capital expenditures. Firms led by narcissistic CEOs are associated with lower innovative productivity in the form of patents and lower financial productivity in the form of profitability and operating cash flows. Despite this negative performance, narcissistic CEOs enjoy higher absolute and relative compensation. Using an options-based measure of overconfidence, we document our results are not driven by CEO overconfidence.
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