Chief executives with bigger signatures make more money ... but only for themselves.
That's the conclusion from a new study on executive narcissism from UNC, which used the size of personal signatures in SEC filings as a proxy for self-importance. Since the 1970s, psychological studies have tied signature size to narcissistic characteristics.
Narcissistic CEOs spend more on capital -- offices, robots, software -- and acquisitions and also perform most poorly in competitive industries during uncertain times. From the report:
We find that CEO signature size is positively associated with a number of proxies for overinvestment, and that abnormal investment by narcissists destroys firm value via reduced sales growth and future revenues. Signature size is also negatively associated with current return on assets, especially for firms in early life-cycle stages (i.e. smaller, younger, more R&D intensive firms) where a CEO's strategic decisions are most likely to impact the firm's future value. Despite the negative relationship between CEO narcissism and firm performance, narcissistic CEOs enjoy higher absolute and relative compensation.
So, executive narcissism is positively related to over-investment in the short-term. Feel free to speculate in the comment section what that means in Washington.
[via The Awl]
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