The impact of managerial narcissism and managerial overconfidence on corporate reputation: the moderating role of managerial myopia

PurposeThe main objective of the paper is to examine the relationship between managerial attributes (e.g. managerial entrenchment, managerial myopia and managerial overconfidence) and firm risk-taking on the Tehran Stock Exchange (TSE).Design/methodology/approachThe study’s sample comprises 150 companies listed on the TSE from 2011 to 2017. Risk-taking is calculated as the standard deviation (SD) of stock return. Explanatory factor analysis was performed to calculate the weight of each of the five variables managerial ownership, board independence, chief executive officer (CEO) tenure, board compensation and CEO duality as a proxy for managerial entrenchment. The study by Anderson and Hsiao (1982) was also used to calculate managerial myopia, and the study by Schrand and Zechman (2012) was used to calculate managerial overconfidence.FindingsThe results indicate that the effect of managerial entrenchment and managerial myopia on risk-taking of listed firms on the TSE is positive and significant, implying that an increase in CEO entrenchment is likely to give rise to risk-taking. The authors conjecture that this finding could be due to the investment projects impairing the firm performance in the long run. Furthermore, the effect of managerial overconfidence on listed firms' risk-taking on the TSE is significantly negative. Since overconfidence is one of the traits of narcissism and corporate managers tend to be encouraged and admired, it is implied that they tend to make efficient and low-risk investments that ultimately reduce the firm risk-taking.Originality/valueSeveral theoretical studies show that managerial behavior is a determining factor in the economy. One of the reasons which justify the originality of this study is the context and institutional environment. Undoubtedly, managerial behavior (e.g. managerial entrenchment, managerial myopia and managerial overconfidence) is expected to have some significant variations in developing countries compared to prevailing in developed countries, particularly in the Iranian stock market the economic sanctions. Furthermore, due to the direct impact of individuals' psychological and behavioral characteristics on their decisions and the effect of companies' risk-taking on increasing and decreasing shareholders and companies' wealth, this research is essential. Given the function of designed behavioral criteria for assessing risk-taking behaviors, the relationship between managerial attributes and firms' risk-taking is still unclear and investigated in this study.

Introduction Corporate financial distress has always been one of the main concerns of creditors, investors and governments, so that early detection of companies that are on the verge of financial distress can to some extent prevent potential losses to stakeholders (Mashayekhi & Ganji, 2014). Determining the exact cause or causes of bankruptcy and financial problems is not an easy task. In most cases, multiple causes together lead to the phenomenon of bankruptcy. However, these factors can be classified into two general groups of intra-organizational and extra-organizational reasons (Bruno and Lei Decker, 2008). Inefficient management and lack of management are among the most important reasons within the organization of this phenomenon (Newton, 1998). Studies conducted by personality models have often highlighted the role of personality as one of the most important determinants in job performance, success and productivity (Alizadeh, 2007). According to Taylor and Brown (1998), is an effective factor in increasing performance, but if people are overconfident in their capabilities, it will lead to judgmental biases. Therefore, identifying the factors affecting companies’ financial distress, including: personality traits of senior managers (including: neuroticism, extroversion, openness to experience, adaptability and conscientiousness) and their overconfidence, factors that greatly influence companies' financial decisions and performance, is one of the most important issues in predicting and preventing financial distress and corporate bankruptcy, which has been addressed in the present study. Hypotheses The purpose of this study was to investigate the mediating role of overconfidence on the effect of personality traits of senior managers on corporate financial distress. Accordingly, research hypotheses are formulated as follows. H1: The personality factor of neuroticism indirectly has a negative effect on corporate financial distress through the intermediate variable of overconfidence of senior managers. H2: The personality factor of extroversion indirectly has a positive effect on the financial distress of companies through the intermediate variable of overconfidence of senior managers. H3: The personality factor of openness to experienceindirectly has a positive effect on corporate financial distress through the intermediate variable of overconfidence of senior managers. H4: The personality factor of adaptation indirectly has a positive effect on corporate financial distress through the intermediate variable of overconfidence of senior managers. H5: The conscientious personality factor indirectly has a negative effect on corporate financial distress through the intermediate variable of overconfidence of senior managers. H6: Overconfidence of senior managers has a positive effect on companies' financial distress. Method To examine the subject of the research, the required data through the financial statements of companies listed on the Tehran Stock Exchange and standard questionnaires of Five factors of neo personality (McCrae and Costa (1985), overconfidence (Rosenberg, 1965) and designed checklist of financial distress were collected. Structural equation modeling method, Smart PLS2 software was used to analyze the data. The statistical sample studied in this study includes 181 senior managers of manufacturing companies listed on the Tehran Stock Exchange in 1397 who were selected by purposive removal method. Results The results of testing the hypotheses showed that some personality traits of senior managers indirectly affect the financial distress of companies through the mediating variable of overconfidence, in such a way that: The test results of the first and fifth hypotheses indicated that personality traits of neuroticism and conscientious did not have an indirect effect on managers' financial distress through overconfidence of managers. The test results of the second, third and fourth hypotheses showed that the personality dimensions of extraversion, openness to experience and adaptability with indirect path coefficient of 0.23, 0.073, 0.101, respectively, indirectly through the mediating variable of overconfidence have a positive effect on companies’ financial distress. The result of the sixth hypothesis, showed that the variable of overconfidence with a positive effect on financial distress, directly explains more than 45% of the changes of the variable of financial distress. 5. Discussion and Conclusion Findings showed that the three personality dimensions of extraversion, openness to experience and adaptability of senior managers indirectly through the variable of overconfidence have a positive effect on the financial distress of companies and two personality dimensions of neuroticism and conscientiousness indirectly through the intermediate variable of overconfidence had no effect on the financial distress of companies. Therefore, considering the strategic decisions of senior managers in the success and failure of companies, which can be affected by the personality traits and their overconfidence behavioral bias, and also requires the responsibility of managers to be accountable to the company's stakeholders, shareholders and the appointing committee of senior managers of companies, when selecting senior managers, consider the personality traits and behavioral bias of their managers' overconfidence as two factors affecting the company's performance. From the perspective of this study, are individuals with conscientious personality traits, the best range of personality and the option of appointment to hold managerial positions at various organizational levels, especially senior managers.

Introduction Corporate financial distress has always been one of the main concerns of creditors, investors and governments, so that early detection of companies that are on the verge of financial distress can to some extent prevent potential losses to stakeholders (Mashayekhi & Ganji, 2014). Determining the exact cause or causes of bankruptcy and financial problems is not an easy task. In most cases, multiple causes together lead to the phenomenon of bankruptcy. However, these factors can be classified into two general groups of intra-organizational and extra-organizational reasons (Bruno and Lei Decker, 2008). Inefficient management and lack of management are among the most important reasons within the organization of this phenomenon (Newton, 1998). Studies conducted by personality models have often highlighted the role of personality as one of the most important determinants in job performance, success and productivity (Alizadeh, 2007). According to Taylor and Brown (1998), is an effective factor in increasing performance, but if people are overconfident in their capabilities, it will lead to judgmental biases. Therefore, identifying the factors affecting companies’ financial distress, including: personality traits of senior managers (including: neuroticism, extroversion, openness to experience, adaptability and conscientiousness) and their overconfidence, factors that greatly influence companies' financial decisions and performance, is one of the most important issues in predicting and preventing financial distress and corporate bankruptcy, which has been addressed in the present study. Hypotheses The purpose of this study was to investigate the mediating role of overconfidence on the effect of personality traits of senior managers on corporate financial distress. Accordingly, research hypotheses are formulated as follows. H1: The personality factor of neuroticism indirectly has a negative effect on corporate financial distress through the intermediate variable of overconfidence of senior managers. H2: The personality factor of extroversion indirectly has a positive effect on the financial distress of companies through the intermediate variable of overconfidence of senior managers. H3: The personality factor of openness to experienceindirectly has a positive effect on corporate financial distress through the intermediate variable of overconfidence of senior managers. H4: The personality factor of adaptation indirectly has a positive effect on corporate financial distress through the intermediate variable of overconfidence of senior managers. H5: The conscientious personality factor indirectly has a negative effect on corporate financial distress through the intermediate variable of overconfidence of senior managers. H6: Overconfidence of senior managers has a positive effect on companies' financial distress. Method To examine the subject of the research, the required data through the financial statements of companies listed on the Tehran Stock Exchange and standard questionnaires of Five factors of neo personality (McCrae and Costa (1985), overconfidence (Rosenberg, 1965) and designed checklist of financial distress were collected. Structural equation modeling method, Smart PLS2 software was used to analyze the data. The statistical sample studied in this study includes 181 senior managers of manufacturing companies listed on the Tehran Stock Exchange in 1397 who were selected by purposive removal method. Results The results of testing the hypotheses showed that some personality traits of senior managers indirectly affect the financial distress of companies through the mediating variable of overconfidence, in such a way that: The test results of the first and fifth hypotheses indicated that personality traits of neuroticism and conscientious did not have an indirect effect on managers' financial distress through overconfidence of managers. The test results of the second, third and fourth hypotheses showed that the personality dimensions of extraversion, openness to experience and adaptability with indirect path coefficient of 0.23, 0.073, 0.101, respectively, indirectly through the mediating variable of overconfidence have a positive effect on companies’ financial distress. The result of the sixth hypothesis, showed that the variable of overconfidence with a positive effect on financial distress, directly explains more than 45% of the changes of the variable of financial distress. 5. Discussion and Conclusion Findings showed that the three personality dimensions of extraversion, openness to experience and adaptability of senior managers indirectly through the variable of overconfidence have a positive effect on the financial distress of companies and two personality dimensions of neuroticism and conscientiousness indirectly through the intermediate variable of overconfidence had no effect on the financial distress of companies. Therefore, considering the strategic decisions of senior managers in the success and failure of companies, which can be affected by the personality traits and their overconfidence behavioral bias, and also requires the responsibility of managers to be accountable to the company's stakeholders, shareholders and the appointing committee of senior managers of companies, when selecting senior managers, consider the personality traits and behavioral bias of their managers' overconfidence as two factors affecting the company's performance. From the perspective of this study, are individuals with conscientious personality traits, the best range of personality and the option of appointment to hold managerial positions at various organizational levels, especially senior managers.

Purpose Corporate social responsibility (CSR) might be among the primary factors ensuring any organization’s survival, and disclosing its related information is very important. This research initially investigates the effect of managers’ behavior characteristics, including overconfidence, myopia and narcissism and corporate political ties on the disclosure of CSR. This study also aims to assess the mediating impact of political connections on the association between managerial personality traits and CSR. Design/methodology/approach The research sample included 129 listed companies on the Tehran Stock Exchange from 2013 to 2020. Behavioral managerers charecteristics. A multivariate regression method with combined data (firm-year) was used to test the research hypotheses. Findings The results show that overconfidence and managerial myopia cause the disclosure of CSR to decrease. Managers’ overconfidence and short-term attitudes lead to a decrease in the level of CSR activities of the companies and their disclosure, respectively, 0.021 and 0.025. However, the existence of narcissism in managers and having political ties by companies may lead to an increase in the disclosure of the CSR, respectively, around 0.089 and 0.02. Further findings also indicate that political connections may motivate narcissistic managers to increase CSR disclosure near 0.037. However, the results document no significant impact of political ties on the relationship between managerial overconfidence and myopia with CSR involvement. Research limitations/implications According to the findings, the authors recommend to stockholders that employing narcissistic managers and improving political connections might be two effective strategies to enhance the level of CSR engagement. One of the critical limitations of the current paper might be its generalizability. As Iran is an emerging and fossil fuel seller country, its institutional settings may significantly differ from those of developed and industrial nations. Thus, the readers of these nations must consider such an important issue. Originality/value For the first time, to the best of the authors’ knowledge, this research has investigated the moderating effect of political ties on the association between management behavioral characteristics and the level of fulfilling CSR by listed companies.

Purpose: This paper examines the relationship between corporate reputation, managerial overconfidence, and the cost of equity in the context of Vietnam - a fast-growing emerging market. Design/methodology/approach: The paper employs Pooled Ordinary Least Square, Fixed Effect Model and Random Effect Model to test the effects of corporate reputation and managerial overconfidence on the cost of equity on 391 non-financial Vietnamese listed firms during 2011 and 2020. In addition, Principal Component Analysis is also applied for calculating the corporate reputation score. Findings: The finding shows that firms with higher corporate reputation are associated with a lower cost of equity. The results also indicates that despite the insignificant relationship between managerial overconfidence and the cost of equity, firms operated by overconfident managers can promote the negative effect between corporate reputa-tion and the cost of equity. In addition, the more reputable corporates increase, the lower the cost of equity will be. Research limitations/implications: Firms in Vietnam can manage the cost of equity better. Furthermore, based on the managers' characteristics and the state of corporate reputation, investors can make appropriate investment decisions. Originality/value: Prior research shows that corporate reputation is negatively related to the implied cost of equity. However, in Vietnamese stock market, under managerial overconfidence, the association between corporate reputa-tion and the cost of equity is also greatly affected. Furthermore, changes in corporate reputation also have certain effects on the cost of equity, especially when corporate reputation is enhanced every year.

Prior research suggests that corporate image and reputation can contribute to relationship marketing and customer loyalty. However, little empirical evidence supports the influence of these constructs on customer loyalty. This study investigates the influence of corporate image – comprised of functional and emotional aspects – and reputation on customer loyalty. A structural equation model is developed to test the research hypotheses. The study was tested using data collected from a sample of Spanish consumers in a service setting. Results show that functional and emotional image have a positive influence on corporate reputation. Similarly, corporate reputation has a positive influence on customer loyalty. This study may help managers use their resources more effectively by focusing on corporate image and reputation as important strategic assets to enhance customer loyalty.

The present study’s main objective is to assess the impact of non-financial sustainability reporting (NFSR) on corporate reputation and the role of the CEO in the opportunistic behavior of companies listed on the Tehran Stock Exchange. In total, 178 firms were assessed for this paper during 2013–2020. In this study for calculating the NFSR, environmental sustainability reporting (ESR), social sustainability reporting (SSR), governance sustainability reporting (GSR) and ethical sustainability reporting (ETSR), Arianpoor and Salehi’s comprehensive and conceptual model has been used. In addition, the literature states that a CEO’s power can be classified as an opportunity for discretion and opportunistic behavior in CEOs that is in contrast with stakeholder demands. To this end, in this study, CEOs’ power has been used as an indicator for the CEO’s opportunistic behavior, and the CEO pay slice (CPS) index was used to calculate the CEO’s level of power. The results revealed that NFSR affects corporate reputation positively. In addition, ESR, SSR, ETSR and GSR positively affect corporate reputation. Moreover, the CEO’s power affects the relationship between NFSR/ESR/SSR/ETSR and corporate reputation. Because managers desire to engage in social and ethical activities, they try to hide the company’s errors and increase its reputation. The results revealed that the CEO’s power did not affect the relationship between GSR and corporate reputation. Since companies in the Tehran Stock Exchange are under intensive supervision, such as in governance, the impact of a CEO’s power and the interaction of a CEO’s power and GSR on company reputation in this study might, thus, not apply to these companies. It is crucial to investigate NFSR, corporate reputation and CEO power within Iran-specific conditions because of differences in emerging markets and developing countries such as Iran, which have diverse ownership structures, economic status, legal systems, government policies, and culture.

The present study assesses the relationship between corporate reputation, CEO narcissism, and financial statement comparability of listed firms on the Tehran Stock Exchange. For this study, multivariate and logistic regression is used for hypothesis testing. The study's statistical population includes all listed firms on the Tehran Stock Exchange during 2012-2017, and the sample comprises 740 year-company. The exploratory factor analysis of 34 variables is used for calculating corporate reputation. The study results show a positive and significant relationship between corporate reputation, CEO narcissism, and financial statement comparability. This means that by increasing corporate reputation, the comparability of financial statements and CEO narcissism will go up. This paper can contribute to the development of knowledge in this field, and this is the first study to compute corporate reputation using the exploratory factor analysis of 34 variables.

The present study's main objective is to assess the relationship between corporate reputation and different types of earnings management (accrual-based, real, and reductive earnings management). In other words, this paper attempts to figure out whether corporate reputation can contribute to the amount of accrual-based, real, and reductive earnings management or not. This paper's method is descriptive-correlational based on published information from listed firms on the Tehran Stock Exchange during 2012-2018 with a selected sample of 187 firms (1309 observations). The method applied for hypothesis testing is linear regression using panel data. The obtained results from hypothesis testing show that corporate reputation has a negative and significant relationship with accrual-based, real, and reductive earnings management, which means highly-reputed firms, are less likely to embark on different earnings management types. Since this paper analyzes the emergent financial markets, like Iran, with extremely competitive audit markets to determine the effect of corporate reputation on different types of earnings management of listed firms on the Tehran Stock Exchange, it can provide useful information in this field.

The purpose of this study is to investigate the relationships among corporate social responsibility (CSR), corporate brand credibility, corporate brand equity, and corporate reputation. Structural equation modeling analysis provided support for the hypotheses from a sample of 867 consumers in South Korea. The results showed that CSR has a direct positive effect on corporate brand credibility and corporate reputation. In addition, the results indicate that corporate brand credibility mediates the relationship between CSR and corporate reputation. Moreover, corporate brand credibility mediates the relationship between CSR and corporate reputation. Finally, the relationship between CSR and corporate brand equity is sequentially and fully mediated by corporate brand credibility and corporate reputation. The theoretical and managerial implications of the results and limitations are discussed, and future research directions are suggested.

Since the mid-1990s, the changing political, economic and social environment and globalisation have contributed to change business behaviour in South Africa. Nowadays, business strategies are built alongside sustainable business goals, with renewed emphasis on quality and brand reputation management. Business intelligence (BI) systems and research demand show clear emphasis on customer brand franchising and brand citizenship in particular. Brands are no longer used only as marketing communication tools. Nowadays, brand companies seem well aware of stakeholders’ concerns with non-financial business aspects and are responding through re-branding, improved customer relations and good corporate citizenship behaviour. Consequently, direct customer feedback via customer satisfaction and franchise-building research, as well as corporate citizenship image and perception surveys have emerged as key research tools that generate business intelligence used to build and protect company reputation. The way in which contemporary research designs are constructed to guide reputation building and protection, and how these inputs are used to guide business reputation strategies form the core of this article. The discussion reveals that corporate reputation and brand management functions are increasingly being synchronised in support of customer-based brand equity, customer franchise and reputation building. This suggests substantial communality between the management functions relating to corporate reputation and branding. Corporate branding and reputation are anticipated to evolve as a core business strategy aimed at building and protecting corporate identity and image. To meet this endeavour, companies will continue to brand their identity and image and create brand awareness and customer relations to enable stakeholders to differentiate company products, services and features from competitor offerings, but will simultaneously strive to enhance customer loyalty. Customer care and ethical behaviour will probably lead the thrust in creating positive corporate reputation. As long as corporate reputation building and branding are pursued, the demand for business intelligence information related to these topics will remain a priority and will guide future marketing and communication strategies in building and protecting corporate reputation.

PurposeThis study aims to investigate the impacts of the psychological behaviors of managers, including entrenchment, myopia, narcissism and overconfidence, on money laundering at Iranian companies listed on the Tehran Stock Exchange.Design/methodology/approachThe present study is descriptive-correlational in terms of methodology and applied research in terms of objectives. The statistical population consisted of all companies listed on the Tehran Stock Exchange during 2013–2019. A total of 150 companies were selected as samples via screening. Logistic regression was used to analyze the data and test the hypotheses in EViews v10.FindingsThe findings revealed that management entrenchment, managerial myopia, managerial narcissism and managerial overconfidence have significant impacts on money laundering.Originality/valueThis study pioneer investigating the impacts of psychological behaviors among managers on money laundering in Iran. As an economic crime, money laundering poses an adverse impact on economic growth in countries. The continuous monitoring of manager performance and the deployment of performance measurement systems could prevent the negative impacts of manager behavior on money laundering.

The study aims to determine the effect of intellectual capital and corporate social responsibility on firm value with corporate reputation as an intervening variable in financial companies from various sectors listed on the Indonesia Stock Exchange between 2021-2023. The data analysis approach employs either component-based or variance-based Structural Equation Modeling analysis, commonly referred to as Partial Least Squares (PLS), using SmartPLS software. The results of this study show that intellectual capital has a positive impact on business value and that corporate social responsibility also has a positive impact on business value. However, intellectual capital has no influence on corporate reputation, while CSR has a positive influence on corporate reputation. In addition, corporate reputation also has a positive influence on corporate value. Corporate reputation does not mediate the relationship between intellectual capital and corporate value, but it does mediate the relationship between corporate social responsibility and corporate value. Keywords: Intellectual Capital; Corporate Social Responsibility; Corporate Reputation; Firm Value

Purpose: This study investigates the relationship between product diversification strategy and cost stickiness, focusing on managerial overconfidence as a moderating factor. It aims to address a critical gap in the literature by providing empirical insights grounded in the Resource-Based View (RBV) theory, specifically examining firms listed on the Tehran Stock Exchange. Methodology: Utilizing a sample of 149 companies from the Tehran Stock Exchange in Iran spanning from 2015 to 2021, this study tests two hypotheses: (1) a positive relationship between product diversification and cost stickiness and (2) the amplification of this relationship by managerial overconfidence. Product diversification is quantified using the Herfindahl Index, while managerial overconfidence is measured through an investment-based index derived from capital expenditures. Cost stickiness is assessed by analysing the asymmetric behaviour of costs in response to changes in sales, focusing on how costs tend to remain high even when sales decrease. Findings: The empirical results substantiate both hypotheses, demonstrating a significant positive relationship between product diversification strategy and cost stickiness. Furthermore, managerial overconfidence amplifies this relationship, highlighting the role of internal resources and managerial perceptions in shaping cost behaviour. Originality: This study contributes substantially to the literature by being among the first to empirically examine the interplay between product diversification strategy, cost stickiness, and managerial overconfidence. Extending the RBV theory to cost behaviour and strategic management provides novel insights for scholars and practitioners in entrepreneurship, corporate strategy, and organizational behaviour. The findings underscore the importance of strategic choices and managerial traits in determining cost stickiness, offering valuable implications for financial analysts, auditors, and stakeholders.

Objective - A study by Ernst and Young (2010) found that 84% of public companies believed that Corporate Social Responsibility (CSR) was an activity that had a positive impact on companies. However, only 11% of those companies disclosed their CSR in their annual reports. This article presents the findings of a study examining the effect of CSR regulation and corporate financial performance, as measured by corporate liquidity, profitability, leverage and firm value, on the disclosure level of the CSR of public companies in Indonesia, and its impact on corporate reputation. Methodology/Technique - Hypothesis tests with multiple regression were used with nonfinancial corporate categories listed on the Indonesian Stock Exchange between 2010 to 2018. Purposive sampling was used, with results from 217 sampled companies and 1953 datasets used in the model. Findings - The study reveals that there is a significant difference in the CSR disclosure of all corporate categories after the regulation of CSR was enacted as a mandatory in 2012. Financial performance measured through Cash Flow from Operations (CFO) and Debt to Equity Ratio (DER) had a positive significant influence on CSR disclosure. However, Return on Assets (ROA) and firm value have no influence. Family ownership as a moderating variable had a negative influence and weakened the association between CFO and CSR disclosure, whereas foreign ownership as a moderating variable had a negative influence and weakened the association between ROA and CSR disclosure. CSR disclosure had a positive influence on corporate reputation from the stakeholders’ perception in terms of awards received by the company and the individual stock price index as an alternative measurement for reputation. Novelty - The impact of CSR disclosure on corporate reputation was analysed based on the alternative measurement of reputation. Ownership structure consisting of family ownership and foreign ownership were taken as the moderating variables in the correlation between financial performance and the disclosure of CSR. Type of Paper: Empirical. JEL Classification: M14, M41. Keywords: Corporate Social Responsibility; Regulation; Financial Performance; Moderation; Ownership Structure Corporate Reputation. Reference to this paper should be made as follows: Wilestari, M.; Syakhroza, A; Djakman, C.D; Diyanty, V. (2021). The Influence of Regulation and Financial Performance on The Disclosure of Corporate Social Responsibility and Corporate Reputation Moderated by Ownership Structure, Accounting and Finance Review, 5(4): 13 – 22. https://doi.org/10.35609/afr.2021.5.4(2)