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CEO narcissism, board of directors and disclosure quality: evidence from the readability of CEO letter

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  • Julien Maux

    (HEC Montréal)

  • Nadia Smaili

    (Université du Québec à Montréal)

Abstract

Firms face increasing pressure to provide comprehensible organizational reports. The CEO annual letter to shareholders (CEO letter) is an important communication medium (Craig and Amernic in J Bus Ethics 101:563–575, 2011) and the most widely read section of the annual report (Courtis, 1982; Hyland, 1998). In this study, we investigate whether CEO narcissism affect the readability of CEO letters. We test the hypothesis that narcissistic leaders write complex and confusing CEO letters. We also examine the role of the board of directors in mitigating this relation by looking at board power as a critical corporate governance mechanism. Based on an analysis of 462 CEO letters published by French companies between 2010 and 2014, we find that CEO narcissism is associated with less readable CEO letters. However, a vigilant board of directors is positively associated with readability in terms of the length of the CEO letter.

Suggested Citation

  • Julien Maux & Nadia Smaili, 2024. "CEO narcissism, board of directors and disclosure quality: evidence from the readability of CEO letter," International Journal of Disclosure and Governance, Palgrave Macmillan, vol. 21(3), pages 341-358, September.
    • Handle: RePEc:pal:ijodag:v:21:y:2024:i:3:d:10.1057_s41310-023-00200-9
    DOI: 10.1057/s41310-023-00200-9
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