The Impact of CEO Narcissism on Earnings Management

17 Pages Posted: 13 Jun 2018

See all articles by Francesco Capalbo

Francesco Capalbo

Second University of Naples - Department of Economics; Seconda Universita degli Studi di Napoli

Alex Frino

University of Wollongong

Ming Ying Lim

Macquarie Graduate School of Management; Capital Markets CRC Limited

Vito Mollica

Macquarie Graduate School of Management; Capital Markets CRC Limited (CMCRC); Macquarie University, Macquarie Business School

Riccardo Palumbo

University of Chieti-Pescara; European Capital Markets CRC

Date Written: June 2018

Abstract

We provide the first empirical test of the relation between CEO narcissism and earnings manipulation. We test the hypothesis that narcissistic leaders over‐identify themselves with the organizations they lead and expend considerable effort to achieve their goals, including by engaging in unethical behaviour. Earnings announcements are highly anticipated information releases by organizations. They are a key performance indicator used to evaluate the performance of CEOs. This study examines the use of first person singular pronouns by CEOs in response to questions at analyst conferences to measure narcissism. We provide evidence that firms with narcissistic CEOs engage in accruals management to manage earnings positively, highlighting the important effect of CEO personality on accounting choices.

Keywords: Personality, Earnings management, Narcissism, Chief executive officer, Earnings announcements

Suggested Citation

Capalbo, Francesco and Frino, Alex and Lim, Ming Ying and Lim, Ming Ying and Mollica, Vito and Palumbo, Riccardo, The Impact of CEO Narcissism on Earnings Management (June 2018). Abacus, Vol. 54, Issue 2, pp. 210-226, 2018, Available at SSRN: https://ssrn.com/abstract=3194888 or http://dx.doi.org/10.1111/abac.12116

Francesco Capalbo (Contact Author)

Second University of Naples - Department of Economics ( email )

Corso Gran Priorato di Malta
Capua, Caserta 81043
Italy

Seconda Universita degli Studi di Napoli ( email )

Via Catullo 64
80122 Napoli, Caserta
Italy
0823 620218 (Phone)

Alex Frino

University of Wollongong ( email )

Northfields Avenue
Wollongong, New South Wales 2522
Australia

Ming Ying Lim

Capital Markets CRC Limited ( email )

GPO Box 970
55 Harrington Street
Sydney, NSW 2001
Australia

Macquarie Graduate School of Management

Vito Mollica

Macquarie Graduate School of Management ( email )

Capital Markets CRC Limited (CMCRC) ( email )

Level 3, 55 Harrington Street
Sydney, 2000
Australia

Macquarie University, Macquarie Business School ( email )

New South Wales 2109
Australia

Riccardo Palumbo

University of Chieti-Pescara ( email )

Via Luigi Polacchi 11
Chieti, Chieti 66100
Italy

HOME PAGE: http://www.unich.it

European Capital Markets CRC ( email )

Via Luigi Polacchi 11
Chieti, Chieti 66100
Italy

HOME PAGE: http://www.ecmcrc.org

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