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Do Narcissistic Managers Prefer Incentive Systems Based on Financial Instruments? An Analysis Based on Choice Experiments

Eva Crespo-Cebada (), Carlos Díaz-Caro (), Aurora E. Rabazo-Martín () and Edilberto J. Rodríguez-Rivero ()
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Eva Crespo-Cebada: Department of Economics, Faculty of Agriculture, University of Extremadura–Ctra, Cáceres s/n, 06071 Badajoz, Spain
Carlos Díaz-Caro: Department of Finance and Accounting, Faculty of Business, Finance and Tourism, University of Extremadura, Avda. de la Universidad s/n, 10071 Cáceres, Spain
Aurora E. Rabazo-Martín: Department of Finance and Accounting, Faculty of Economic and Business Sciences, University of Extremadura, Avda. De Elvas s/n, 06006 Badajoz, Spain
Edilberto J. Rodríguez-Rivero: Department of Finance and Accounting, Faculty of Economic and Business Sciences, University of Extremadura, Avda. De Elvas s/n, 06006 Badajoz, Spain

Sustainability, 2021, vol. 13, issue 3, 1-13

Abstract: The purpose of this work is to analyse the preferences of Chief Executive Officers (CEOs) in relation to the different components of incentive systems: financial vs. non-financial. The incentive systems could be an instrument for the sustainable development of Firms. Upper Echelons Theory establishes that the traits of executives affect the decision-making processes, and among these traits, narcissism is a potentially influential factor in these processes. Therefore, the extent to which the level of narcissism influences the choice of one instrument or another is also analysed. For this purpose, a choice experiment has been carried out to analyse the preferences of CEOs. The questionnaire developed incorporates both the choices about different systems and the NPI-16 test that allows individuals to be classified according to their narcissistic nature. The main results show that, in general, there is a stronger preference for non-financial instruments than for financial instruments in the design of incentive systems. However, narcissistic CEOs show a clear inclination towards financial incentives that bring them benefits rather than provide incentives.

Keywords: narcissism; management control systems (MCS), incentive system; upper echelons theory; choice experiment (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2021
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