 CEO narcissism and the agency cost of debtJ.H. John Kim and Ronald Anderson Journal of Empirical Finance, 2024, vol. 77, issue C Abstract: This study investigates the relationship between CEO narcissism and debt financing costs, highlighting a potential trade-off between leadership traits and firm financial well-being. While prior research has identified potential benefits associated with narcissistic CEOs, such as enhanced innovation, we demonstrate that such leadership incurs higher borrowing costs, as evidenced by elevated bond yields in firms led by narcissistic executives. This effect is amplified for grandiose narcissists, suggesting that investors are particularly wary of their risk-taking tendencies. Leveraging a natural experiment, we establish a robust causal link between narcissism and debt costs, revealing higher bond yield premiums demanded by investors in firms with narcissistic CEOs. These findings underscore the critical importance of considering CEO personality traits, particularly narcissism when evaluating corporate governance practices and ensuring optimal alignment with stakeholders' interests. Keywords: CEOs; Narcissism; Textual analysis (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:empfin:v:77:y:2024:i:c:s0927539824000124 DOI: 10.1016/j.jempfin.2024.101477 Access Statistics for this article Journal of Empirical Finance is currently edited by R. T. Baillie, F. C. Palm, Th. J. Vermaelen and C. C. P. Wolff More articles in Journal of Empirical Finance from Elsevier |
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