Walk into any bookstore’s business section and you’ll find shelves of titles celebrating bold, charismatic executives who bend reality to their will. But the people whose job it is to predict how companies will perform — the securities analysts who issue buy, hold, and sell recommendations to investors — may be watching these larger-than-life leaders with a more skeptical eye.
A new investigation published in a management research journal set out to answer a specific question: When a company is led by a notably narcissistic chief executive, do the analysts who follow that company give its stock less favorable recommendations? The short answer, based on data from 75 CEOs at 66 major U.S. corporations, is yes. And the effect isn’t uniform. Certain company characteristics amplify it, while others soften it.
The question behind the research
Narcissism in CEOs has become a hot topic in strategy research, partly because so many studies have come to contradictory conclusions. Some find narcissistic leaders damage company performance with reckless decisions; others suggest their willingness to take bold risks can shake companies out of stagnation. Most of this work has focused on what narcissistic CEOs do inside their companies, not on how outside observers react to them.
Karynne Turner of Middle Tennessee State University, working with Feray Adigüzel of Nottingham Trent University and Jatinder Sidhu of the University of Leeds, wanted to look outward. Specifically, they asked how securities analysts — the professional forecasters whose ratings can move stock prices — factor CEO personality into their assessments.
To understand why this matters, it helps to know what analysts actually do. They work at brokerage firms and investment banks, following a handful of companies in detail, publishing earnings forecasts and issuing ratings that run from “strong buy” to “sell.” Investors pay attention. Research has shown that when analysts downgrade a stock, the share price often drops. That makes analysts a form of external corporate governance — an outside force that can pressure companies and their leaders.
The theory in plain terms
The research drew on an idea called implicit leadership theory. The basic concept: people carry mental templates of what makes a “good leader.” When they observe an executive, they unconsciously compare that person to their template and sort them into effective or ineffective categories. If narcissism is generally seen as a trait of poor leaders — associated with arrogance, attention-seeking, and excessive risk-taking — then analysts should categorize narcissistic CEOs as less capable and rate their companies accordingly.
But the researchers added a twist. They proposed that in some situations, a narcissistic CEO’s appetite for risk might actually look attractive. Large, old, or highly reputable companies can suffer from corporate inertia, meaning a reluctance to change, innovate, or take chances. Under those conditions, a disruptive leader willing to shake things up could counteract the stagnation. Analysts might recognize this and soften their pessimism about narcissistic leadership at such firms.
How the researchers measured narcissism
You can’t exactly hand a survey to every Fortune 100 CEO. So the team used an established method that relies on four observable clues CEOs themselves control. The first is how prominently a CEO appears in the company’s annual report photos. A full-page solo portrait scores high; a group shot with other executives scores lower. The second is the CEO’s use of first-person singular pronouns like “I” and “me” in letters to shareholders, compared to plural pronouns like “we” and “our.” The third and fourth involve pay gaps, comparing the CEO’s cash and non-cash compensation to that of the second-highest-paid executive at the company.
These indicators, combined into a single index, have been used in prior research as proxies for narcissistic tendencies like self-absorption and entitlement. The team built scores for CEOs during the second and third years of their tenure.
The sample included 75 CEOs at 66 companies on the Standard & Poor 100 index between 2003 and 2013, yielding 327 firm-year observations. Analyst recommendations came from a widely used database that compiles ratings on a five-point scale. Company reputation was measured using Fortune magazine’s “Most Admired Companies” rankings, which ask thousands of industry experts to rate companies on eight attributes including innovation, financial stability, and management quality.
What the numbers revealed
The core finding held up across different statistical models. Companies led by more narcissistic CEOs received lower average analyst recommendations. A one-unit increase in the narcissism index corresponded to a 0.2-unit drop in the average recommendation score.
The context-dependent predictions produced mixed results. Company reputation did soften the effect as predicted. When a firm had a stronger reputation, analysts appeared more willing to believe that narcissistic leadership might shake the company out of complacency. Each one-point increase in reputation score reduced the negative effect of narcissism by about 8.9 percent.
Company age, however, showed no meaningful effect on the relationship. Analysts did not seem to treat older firms as candidates for narcissistic disruption.
Most surprising, company size worked in the opposite direction from what the team expected. Rather than making narcissistic leadership look more valuable, being a larger firm made analysts even more pessimistic when the CEO was narcissistic. The researchers suggest this might reflect a belief that the bureaucratic structures of big companies clash with brash, individualistic leadership styles, potentially making things worse rather than better.
What this means for business
For corporate boards, the findings point to a financial cost associated with narcissistic leadership that goes beyond internal strategy decisions. If negative analyst recommendations push down stock prices, then a narcissistic CEO may be creating headwinds in financial markets simply by being perceived as narcissistic by outside observers.
The researchers suggest that boards can help manage this perception. Conference calls with analysts, for instance, offer chances to shape how investors view a CEO. Boards might also limit how much a narcissistic CEO takes the public spotlight, or reduce their involvement in board governance, to blunt the external impact of the trait.
A few cautions apply. The sample was drawn from very large U.S. public companies, so the findings may not extend to smaller firms, family businesses, or companies outside the U.S. The narcissism measure relies on indirect indicators rather than direct personality assessments. And the data show associations rather than proving that CEO narcissism directly causes analysts to downgrade stocks. Still, the pattern is consistent enough to suggest that personality, even from a distance, shapes how financial markets size up a company’s prospects.
