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CEOs' narcissism and opportunistic insider trading

Author

Listed:
  • Jiang, Cheng
  • John, Kose
  • Kim, J.H. John
  • Zhang, Jingyu

Abstract

Narcissism is a multifaceted personality trait that profoundly influences individuals' cognition, emotions, and actions. This study investigates the relationship between narcissistic CEOs and their engagement in opportunistic insider trading. Utilizing a quantitative measure of CEOs' narcissism derived from textual analysis, we find that CEOs with a higher level of narcissism engage in opportunistic insider trading more intensely. To mitigate endogeneity concerns, we employ various rigorous approaches, including matching, instrumental variable, Heckman's two-step sample selection model, and falsification tests. Through cross-sectional analysis, we find that the impact of CEOs' narcissism on opportunistic insider trading is more pronounced among CEOs with limited legal knowledge, facing weaker external and internal monitoring pressure, working at larger firms, and being male. In addition, we demonstrate that the insider trades of narcissistic CEOs are less profitable and less informative than those of non-narcissistic CEOs, as evidenced by subsequent stock performance.

Suggested Citation

  • Jiang, Cheng & John, Kose & Kim, J.H. John & Zhang, Jingyu, 2025. "CEOs' narcissism and opportunistic insider trading," Journal of Corporate Finance, Elsevier, vol. 91(C).
    • Handle: RePEc:eee:corfin:v:91:y:2025:i:c:s0929119924001573
    DOI: 10.1016/j.jcorpfin.2024.102695
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    More about this item

    Keywords

    CEO; Narcissism; Insider trading;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • M12 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Personnel Management; Executives; Executive Compensation

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