Executive Narcissism and the Power of Persuasion: Evidence from the Laboratory and Sell-Side Analyst Valuations
Despite prior research documenting that firms led by narcissistic executives experience numerous detrimental effects, narcissists are more promotable, enjoy longer tenures, and earn higher compensation than their peers. These outcomes suggest firms accrue some benefits from executive narcissism. We provide evidence of one such benefit: the ability to positively influence external stakeholder perceptions of the firm. In a laboratory setting, we find that narcissistic individuals are more likely to engage in persuasion to elicit higher firm valuations from financial analysts, especially when the analyst is more influential with investors. We triangulate this finding with archival evidence from analyst valuations and conference calls. CFO narcissism is associated with overly optimistic analyst valuations, and their valuations are less affected by recent earnings news, particularly when that news is negative. Consistent with attempts at persuasion, conference calls reveal that narcissistic CFOs exhibit greater levels of engagement with analysts, speak more optimistically, and are more likely to use argumentative prose and corporate euphemisms. Collectively, the evidence suggests that narcissistic CFOs use their persuasive skills to positively influence analyst perceptions of the firm.
Executive Narcissism, Persuasion, Sell-Side Analysts
SMU Cox: Accounting (Topic)