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

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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)

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.

Suggested Citation

  • Eva Crespo-Cebada & Carlos Díaz-Caro & Aurora E. Rabazo-Martín & Edilberto J. Rodríguez-Rivero, 2021. "Do Narcissistic Managers Prefer Incentive Systems Based on Financial Instruments? An Analysis Based on Choice Experiments," Sustainability, MDPI, vol. 13(3), pages 1-13, January.
    • Handle: RePEc:gam:jsusta:v:13:y:2021:i:3:p:1255-:d:486860
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    1. Carlos Díaz-Caro & Eva Crespo-Cebada & Borja Encinas Goenechea & Ángel-Sabino Mirón Sanguino, 2023. "Trinomial: Return-Risk and Sustainability: Is Sustainability Valued by Investors? A Choice Experiment for Spanish Investors Applied to SDG 12," Risks, MDPI, vol. 11(8), pages 1-12, August.

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