Consequences of CEO narcissism

Introduction

Research has shown that many CEOs and leaders demonstrate behaviours or tendencies that epitomise narcissism.  But the implications of this observation remain contentious.  The association between CEO narcissism and the performance of organisations, although studied intensely, has generated a complicated, and sometimes conflicting, pattern of results.  Many reasons can be proposed to explain these conflicts.  To illustrate

• CEO narcissism may be detrimental if this narcissism is extreme or pathological but not as detrimental, and perhaps sometimes beneficial, if this narcissism is moderate,
• one subtype, vulnerable narcissism, may be more detrimental than another subtype, grandiose narcissism,
• CEO narcissism may impair some features, but improve other features, of organisations,
• the degree to which CEO narcissism is detrimental may depend on the values, culture, and practices of the organisation.

Unethical, unlawful, or risky behaviours

Many studies have revealed that CEO narcissism does increase the likelihood of irresponsible behaviour in corporations, potentially culminating in lawsuits, scandals, and similar complications.  To illustrate, when CEOs are narcissistic, their firms are more likely to be embroiled in prolonged litigation and lawsuits—arguably because they disregard advice and objective assessments about risk (O’Reilly et al., 2018).

Similarly, Riera and Iborra (2025), in their analysis of 256 Spanish companies, showed that narcissistic CEOs often behave irresponsibly, jeopardising the reputation of their firms. To investigate whether CEO narcissism predicts irresponsible behaviour in these companies, the researchers first needed to apply two main techniques.  First, to estimate CEO narcissism, the researchers examined the LinkedIn profiles of the CEOs.  Consistent with past research on this topic, the researchers identified various properties of these profiles that tend predict narcissism, such as photographs of the CEO in the background photo, a summary section towards the end, and a high number of skills.  

Second, to ascertain whether the company perpetrated irresponsible behaviour—that is, behaviours that intentionally caused harm—the researchers first scanned public databases about these organisations, specifically the Factiva database and Google News.  The researchers then uncovered all reports of irresponsible acts the company had committed.  Finally, the researchers organised a panel of experts in law and management to rate the severity of these irresponsible acts. 

After controlling the gender diversity of the board, international diversity of the board, and whether the company is family owned, CEO narcissism was positively associated with irresponsible behaviours in the corporation.  In the structural equation model, the standardised B value exceeded 0.3, indicating a strong relationship.

Some of these irresponsible or unethical acts may benefit the organisation, at least transiently, but potentially compromise the organisation in the future. To illustrate, Olsen and Stekelberg (2016) explored whether CEO narcissism increases the likelihood the firm will utilise corporate tax shelters.  In this study, to estimate the narcissism of CEOs, the researchers integrated multiple sources of information, including

• CEO pay relative to the pay of the second highest earner in the firm,
• the degree to which a photograph of the CEO was prominent in the annual report—such as a photograph of the CEO alone that covers an entire page.

To identify tax shelters, the researchers applied a model that integrates various metrics, such as the difference between the income of a firm and the taxable income as well as size, return on asserts, and other measures.  After controlling firm performance and size, the findings reveal that narcissistic CEOs were more likely to utilise tax shelters. This aggressive tax avoidance may be beneficial initially but can significantly damage the future reputation and viability of companies. 

Typically, narcissistic CEOs choose these courses of action to benefit their personal reputation or wealth.  To illustrate, Buyl et al. (2019) showed that narcissistic CEOs of banks often endorse risky, and sometimes unsuitable, policies—especially if these acts could attract bonuses.  To gauge the narcissism of CEOs, the researchers assessed

• CEO pay relative to the pay of the second highest earner in the firm,
• the degree to which a photograph of the CEO was prominent in the annual report,
• the extent to which the CEO utilised first-person singular pronouns, such as I or my, in letters to shareholders,
• whether the CEO was the only signatory to these letters,
• the number of words the CEO wrote in the Marquis Who’s Who biography.

To measure the degree to which the CEO endorsed risky policies, the researchers assessed three practices that are emblematic of risk:

• the value of commercial loans relative to total assets,
• the level of noninterest income relative to net operating income, and
• the value of derivatives and off-balance sheet items relative to total assets.

Overall, CEO narcissism was positively associated with the inclination to endorse these risky practices and policies—especially when immediate financial returns attracted bonuses.  Because of these risks, the banks led by narcissistic CEOs did not recover as effectively after the collapse in 2008.  When the board included more outside directors and thus could monitor the firm better, the magnitude of this association between CEO narcissism and risky policies subsided. 

In many instances, the board or shareholders will be oblivious to these risky, unethical, or unlawful strategies of narcissistic CEOs.  That is, narcissistic CEOs are often inclined to communicate dishonestly to shareholders, such as utilise earnings management.  Earnings management refers to practices in which leaders distort financial statements to fulfill some goal or expectation, often flirting within the boundaries of accounting rules.   To illustrate,

• CEOs may advance revenue from a future period to improve their immediate financial results,
• companies may defer expenses to diminish the profit they report now—common if they want to demonstrate improvements in the future.  

Earnings management can benefit the CEO, at least transiently, but culminate in a range of complications.  For example, this practice could mislead directors, investors, or analysts, often translating to misinformed and unsuitable decisions.  If stakeholders discover this practice, the reputation of this company may plummet.  Furthermore, earnings management, although intended to be legal, can sometimes evolve into fraudulent activities, attracting fines and other legal consequences.

Capalbo et al. (2018) conducted a study to explore whether CEO narcissism predicts earnings management.  The researchers utilised a financial equation to estimate the level of earnings management.  As this research showed, CEO narcissism, derived from the tendency to use first-person singular pronouns during responses to analysts, was positively associated with earnings management. 

Tax avoidance: An illustration

CEO narcissism has also been demonstrated to amplify tax avoidance.  To illustrate, Onipe Yahaya and Ahmad Yusuf (2026), two academics employed at the Nigerian Defence Academy, conducted a study that explored the association between the narcissism of CEOs and tax avoidance strategies in 148 Nigerian publicly-listed firms. To estimate the degree to which the CEOs were narcissistic, Yahaya and Yusuf (2026)

• quantified the size of their signatures, because large signatures often coincide with narcissism (e.g., Ham et al., 2018),
• calculated the degree to which these CEOs utilised the terms I, me, my, and mine during speeches and interviews rather than we, us, our, ours—because the excessive use of first-person singular pronouns also coincides with narcissism (e.g.. Chatterjee & Hambrick, 2011).

To estimate the extent to which the firms utilise tax avoidance strategies, the researchers calculated the effective tax rate.  The effective tax rate is the income tax that a company is paying divided by the income of this company before tax, multiplied by 100.  A low number indicates that, somehow, the company is paying minimal tax—often epitomising tax avoidance.  However, to increase the likelihood this effective tax rate is indicative of tax avoidance, the researchers also controlled other characteristics of the firm that may bias this estimate, such as

• the age and size of the firm,
• profitability,
• leverage or total debt divided by total assets,
• asset tangibility—or the proportion of total assets that are property, plant, and equipment
• liquidity—or the current assets divided by the current liabilities,
• and several other measures.

After controlling these measures, CEO narcissism was positively associated with tax avoidance (Yahaya & Yusuf, 2026).  Arguably, narcissistic CEOs overestimate their capabilities and believe that illegitimate tax schemes they implement will not be detected. Alternatively, narcissistic CEOs tend to feel entitled and, therefore, may believe they should not need to pay significant tax.   

Tax avoidance: Other examples

As studies have revealed, CEO narcissism often coincides with tax avoidance in other nations as well, such as Brazil, Indonesia, Iran, Iraq, and Oman (e.g., Hidayat & Fadjarenie, 2025; Jamei & Sohrabi, 2023; RahamHassoon et al, 2024; Sarwono & Fadjarenie, 2025; for conflicting findings, see Kalbuana et al., 2023; Muhlis, 2024; Pandapotan et al., 2024).  To illustrate, Araújo et al. (2021) demonstrated this relationship in an analysis of 68 Brazilian firms across multiple sectors.  To estimate the degree to which the CEOs are narcissistic, the researchers

• determined the degree to which the photograph of this CEO was prominent in the annual report, such as covering an entire page—a common index of narcissism (e.g., Olsen et al., 2014),
• calculated the degree to which the CEO utilised the terms I, me, my, and mine during the annual report rather than we, us, our, ours.  

To estimate tax avoidance, the researchers utilised three metrics (see Atwood et al., 2012; Braga, 2017; Tang, 2015).  For example, one of the metrics was roughly the difference between the earnings before tax and the amount of tax paid, divided by the earnings before tax.  Regardless of the metric, CEO narcissism was positively associated with tax avoidance—even after controlling the gender, age, and education of CEOs, the return on assets, the leverage, the company size, and other characteristics of the firm (Araújo et al., 2021).  According to the authors

• because they like to be admired, narcissistic individuals often initiate improper behaviours impulsively to fulfill their key performance indicators,
• this tendency could partly explain why CEO narcissism is associated with tax avoidance.

Tax avoidance: conflicting results

Not all studies have confirmed this positive association between CEO narcissism and tax avoidance.  For example

• in one study of 43 Indonesian companies, CEO narcissism—estimated from the size of photos in annual reports—was not significantly associated with tax avoidance (Muhlis, 2024),
• in another study of 27 Indonesian companies, CEO narcissism—also estimated from the size of photos in annual reports—was negatively associated with tax avoidance (Kalbuana et al., 2023),
• finally, in a larger study of 126 companies, located in either Indonesia or Australia, CEO narcissism, as estimated from the size of photos in annual reports, was inversely related to tax avoidance.

Several accounts could explain why this subset of studies did not uncover a positive association between CEO narcissism and tax avoidance.  First,

• in two of the three studies, the sample size was small, impeding the capacity of researchers to control financial measures, such as return on assets,
• indeed, in all three studies, key financial measures were not controlled statistically,
• hence, other characteristics of the firm could explain these inverse associations between CEO narcissism and tax avoidance,
• to illustrate, narcissistic leaders may purchase more tangible rather than intangible assets, potentially increasing the effective tax rate.

Alternatively, in particular circumstances, CEO narcissism might diminish tax avoidance.  To illustrate, if the bonuses that CEOs receive depends on profit after tax, narcissistic CEOs, who strive to improve their reputation, will attempt to minimise tax.  But, if the bonuses that CEOs receive do not depend on profit after tax, narcissistic CEOs, who are not especially concerned about the company, may not strive to diminish tax.  Thus, further research on this topic is warranted.

Selection of executive managers

To manage risks and challenges effectively, CEOs need to establish a capable team of executive managers.  One possibility, however, is that narcissistic CEOs may not establish a suitable team: a team able to manage risks and reach astute decisions.  Instead, when they need to recruit an executive, narcissistic CEOs may select the person who is most likely to fulfill their personal need—specifically, their need to maintain or to boost status.  To illustrate, CEOs may

• choose a small executive team so they maintain a high profile and assume responsibility for success,
• prefer an executive who is not particularly educated—or relatively inexperienced in their role— and thus not as likely to question decisions,
• choose an executive team in which only one or two members are experienced in the organisation and thus may want to maintain their position and satisfy the CEO.

To assess this possibility, Kruse et al. (2025) conducted a study of over 600 firms.  To gauge the level of narcissism in CEOs, the researchers analysed the answers of these leaders to questions during earnings calls: conference calls between the management and stakeholders of companies.  Specifically, they assessed the degree to which these answers include words that correspond to five dimensions of narcissism— authority, superiority, exhibitionism, vanity, and self-sufficiency—as identified and validated by Anglin et al. (2018).   Examples of these words include

• accomplished, mastermind, and virtuoso to represent authority,
• fiercest, shrewdest, or outstanding to represent superiority,
• fame, notable, or prominence to represent exhibitionism,
• grandest, pretty, or praiseworthy to represent vanity, and
• mastery, resilience, unfaltering to represent self-sufficiency.

Overall, CEO narcissism, when aggregated across these five dimensions, was negatively associated with the duration the executives had worked in their management role.   That is, these CEOs tended to prefer executives who were inexperienced in their role.  More specifically, when the CEOs were narcissistic, the executives had usually worked in their role for a short time but one or two executives had worked in their role over a very long period. CEO narcissism was not significantly associated with the size of these executive teams or the age of executives.  Nevertheless, the findings are consistent with the notion that CEOs, when narcissistic, do not likely to be challenged—and, therefore, may choose executive teams that fulfill this need.

Financial performance

The decisions of narcissistic CEOs, including some of these risky or unethical practices, may not always impair, and may sometimes improve, the financial position of firms. Indeed, some research, including a meta-analysis, conducted by Cragun et al., (2020), suggests that, on average, CEO narcissism may be positively associated with firm performance.  The meta-analysis that Cragun et al (2020) published analysed 19 studies that have explored how various measures of CEO narcissism are associated with firm performance, as gauged by return on assets, shareholder returns, and operating profit.  Across these studies, the research shows that CEO narcissism was positively related to firm performance.  Nevertheless, the authors raised several caveats:

• as a significant Q value indicates, the association between CEO narcissism and firm performance varied considerably across these studies,
• indeed, some research found that CEO narcissism, as gauged by the size of their signature, is inversely associated with return on investment and operating cash flow (Ham et al., 2018),
• narcissistic CEOs may pursue controversial, unethical, and even unlawful actions that improve firm performance now but could generate problems later. 

To illustrate these complications, Kim and Anderson (2024) showed that narcissistic CEOs may pursue strategies that simultaneously improve financial performance now but also increase the costs of borrowing in the future.  That is, because narcissistic CEOs embrace risky strategies, creditors tend to be wary.  Consequently, these creditors will demand higher returns, increasing the cost of borrowing.  As Kim and Anderson (2024) revealed, a 10% increase in narcissism—as measured by a disproportional use of first-person singular pronouns in speeches—corresponded roughly to a 5% increase in the cost of debt. 

Innovation

To improve financial performance, narcissistic CEOs may not only pursue risky, unethical, or unlawful strategies.  Instead, because narcissistic CEOs often inflate opportunities and capabilities, they may be able to inspire other people—including staff and investors—to pursue lofty goals.  That is, leaders who exhibit grandiose narcissism often express a bold vision of the future and, therefore, tend to be perceived as charismatic (Galvin et al., 2010). Inspired by this vision, staff may be more likely to embrace courageous goals and thus propose innovation solutions.  These innovations may enhance the performance of firms. 

To assess this possibility, Kraft (2022) conducted a meta-analysis of 78 studies that had explored this association between CEO narcissism and innovation—as measured by R&D intensity, entrepreneurial orientation, or innovative culture.  The meta-analysis also explored whether the gender of CEOs and the discretion that was bestowed on CEOs, such as the degree to which the culture tolerates risk, moderates this association between CEO narcissism and innovation. 

As their meta-analysis structural equation modelling revealed, CEO narcissism was positively associated with innovation but not firm performance.  However, the association between CEO narcissism and firm performance was nuanced:

• the innovation that coincided with narcissistic CEOs did improve firm performance
• but the direct association between CEO narcissism and firm performance was negative—implying that other problems, such as costly risks, offset the benefits of innovation,
• both of these pathways were more pronounced in males than females and in nations that tolerate uncertainty and risk.

As these findings imply, narcissistic CEOs, who often seem bold and confident, may stimulate innovation.  But the risky or unethical strategies these CEOs pursue, often because they are bold and confident, tend to offset the benefits of this innovation. 

Attempts to manage these risks

Many studies indicate that narcissistic CEOs will often pursue risky or unethical strategies—especially if they can readily conceal these behaviours.  However, narcissistic CEOs are also especially concerned about their reputation.  To preserve their reputation, these CEOs may thus be more inclined than other leaders to refrain from environmental, social, or governance strategies that may attract unfavourable media attention. 

To explore this possibility, Martínez-Ferrero et al. (2024) extracted data from several databases about 175 Spanish firms.  First, the researchers identified the degree to which each of these firms had attracted unfavourable media coverage around environmental, social, and governance practices. Second, the researchers estimated the narcissism of CEOs from four indicators—including the degree to which the photograph of this CEO was prominent in annual reports, the frequency with which the CEO was mentioned in press releases about the company, and CEO remuneration.

As regression analyses revealed, CEO narcissism was negatively associated with adverse media attention around environmental, social, or governance strategies.  This association is more pronounced when CEOs were granted more power in the firm—either because they owned shares in the company, chaired the board, or had accrued significant experience. 

These findings, at first glance, underscore a benefit of CEO narcissism.  However, Kind et al, (2023) revealed this benefit does not apply when CEO narcissism is especially high.  In this study, the researchers assumed the size of CEO signatures is a proxy measure of narcissism—a measure that has been validated previously (Dillon, 1988; Ham et al., 2017).  In this study, compared to CEOs whose signature was very small, CEOs whose signature was moderately large tended to lead companies in which few environmental, social, and governance concerns were reported.  In contrast, compared to CEOs whose signature was moderately large, CEOs whose signature was very large tended to lead companies in which many environmental, social, and governance concerns were reported. 

Moderate versus high levels of CEO narcissism

These results imply that moderate levels of CEO narcissism may not be detrimental to organisations, whereas high levels of CEO narcissism could be more damaging to organisations.  Other studies have also confirmed this possibility (e.g., Grijalva et al., 2015; Uppal, 2020).  To illustrate,

• Grijalva et al. (2015) revealed that leaders who were moderate on measures of narcissism were perceived as more effective leaders than leaders who received very low or high scores on these measures, as substantiated by a meta-analysis,
• similarly, Uppal (2020) showed that firm performance was better when CEOs were moderate on measures of narcissism rather than very low or very high on these measures.

University performance

Research has also explored the consequences of CEO narcissism in specific industries, such as universities.  To demonstrate, Khoo et al. (2024) explored whether narcissism in UK vice chancellors affects the research performance and teaching performance of their universities. 

Specifically, to measure research performance, Khoo et al. (2024) distilled information the Research Excellence Framework between 2009 and 2020. This framework is designed to measure the quality of research outputs, the research impact, and the research environment of universities.  These attributes are combined to generate a measure of overall research performance.  To gauge teaching performance, the researchers extracted data from the National Student Survey—a survey that UK students complete in their final year at university about the learning resources, learning community, student voice, and organisation of classes.  The survey generates an index called the Student Satisfaction Score.  Finally, the overall ranking of each university was derived from the Guardian newspaper: a ranking that emanates from nine attributes, such as undergraduate student experience and career prospects.  The values on all these ranks were reversed so that high scores indicate better performance.    

To gauge the narcissism of Vice Chancellors, the researchers assessed the size of VC signatures, usually accessible from the annual report or strategic plan of the university.  Next, the researchers constructed a rectangle that immediately surrounds each signature—and calculated the area of this rectangle.  Finally, the researchers divided this area by the number of letters in this name (see Ham et al., 2018, for a similar procedure).  As many studies have shown, this procedure is a valid and unobtrusive measure of CEO narcissism (e.g., Chou et al., 2021; Church et al., 2020; Ham et al., 2018).

As the analyses reveal (Khoo et al., 2024), the narcissism of Vice Chancellors was inversely related to the research performance, teaching performance, and ranking of UK universities.  Specifically

• the narcissism of Vice Chancellors in one year coincided with a decline in performance in subsequent years,
• this pattern of findings persisted even when only handwritten signatures were examined, precluding the possibility that digital adjustments to the size of these signatures could have affected the results.

Further analyses explored the reasons that narcissistic Vice Chancellors tend to impair university performance.  As one set of analyses revealed, in the established universities, including the so-called Russel Group, narcissistic Vice Chancellors were more inclined to implement decisions that were financially risky.  That is, when Vice Chancellors were narcissistic, their university tended to generate unfavourable values on the Financial Security Index: an index that comprises four metrics, such as long-term borrowings as a percentage of total income.

As a second analyses revealed, narcissistic Vice Chancellors appeared to embrace these financial risks to extend their empires, such as establish additional campuses or purchase other institutions.  Specifically, when Vice Chancellors were narcissistic, the ratio of expenses to revenue, as well as capital expenditure, were elevated.  In short, perhaps to fulfill their profound need to seem important, narcissistic Vice Chancellors often strive to extend the span and scope of their university, embracing unhelpful financial risks, and ultimately compromising the viability of their institution.

Corporate social responsibility

Arguably, CEO narcissism may be especially detrimental in some circumstances and not as detrimental, or even beneficial, in other circumstances.  For example, in organisations that are heavily committed to philanthropic ventures and community support, often called corporate social responsibility, the adverse effects of CEO narcissism may be especially pronounced.

To illustrate, in many organisations, narcissistic CEOs, when interacting with stakeholders from outside the organisation, may display a more caring, charitable, and benevolent character.  They may, for example, champion many social causes to impress customers or sponsors. When managers or staff observe this behaviour, they recognise a discrepancy between the leadership style of this CEO at work and the character this person likes to portray in other settings.  Because of this discrepancy, these observers may perceive the leader as hypocritical.  As Greenbaum et al. (2015) revealed, this perception of hypocrisy elicits uncertainty about how the leader will respond in the future, increasing the likelihood that staff will feel uncommitted to their work and leave the organisation.

Consistent with this premise, Yin et al (2024) revealed that abusive CEOs—a style that is more common in narcissistic individuals (Finney et al., 2021)—were more likely to impair the innovation and performance of organisations that strongly endorse corporate social responsibility.  In one study, 717 executive managers and 316 of their corresponding CEOs completed a survey.  Specifically,

• the chief marketing officer answered questions that assess the degree to which the CEO is abusive, such as “My leader tells me my thoughts or feelings are stupid” (Mitchell & Ambrose, 2007),
• the chief operating officer answered questions that assess the extent to which the organisation prioritises corporate social responsibility, such as “Our company integrates charitable contributions into its business activities” (Carroll, 1991),
• the CEO evaluated the degree to which the executive managers coordinate and collaborate effectively, such as “The (senior executives) let each other know when their actions affect another team member’s work” (Simsek et al., 2005).

The researchers also utilised the percentage of sales derived from new products to measure innovation and return on assets to measure performance.  The analyses revealed that

• abusive supervision was inversely associated with the degree to which the executives coordinated and collaborated effectively as well as negatively related to innovation and performance,
• if the organisation prioritised corporate social responsibility, the adverse effect of abusive supervision on the degree to which the executives coordinated and collaborated effectively was more pronounced.

Therefore, although this study measured CEO abusive behaviour, rather than CEO narcissism, the findings are consistent with the notion that narcissism may be especially detrimental in organisations that prioritise corporate social responsibility. Leaders should not assume that corporate social responsibility may offset the deleterious effects of abuse or narcissism.