Executive Narcissism and the Power of Persuasion: Evidence from the Laboratory and Sell-Side Analyst Valuations

with Chad Ham, Mark Piotroski and Nick Seybert (2023)

• We find evidence that narcissistic executives can positively influence external stakeholder perceptions of the firm.

• In the laboratory, we measure the narcissism of experimental participants using well-established psychometric tests (NPI-16), and find that individuals with high narcissism are more likely to engage in persuasive tactics to elicit higher firm valuation from financial analysts.

• Analyzing historical data from analyst valuation reports, we find that CFO narcissism is associated with overly optimistic target prices.

  • These valuations are less sensitive to earnings news, particularly when the earnings news is bad.

• Analyzing conference call transcript data, we find  evidence that narcissistic CFOs engage in persuasive tactics when speaking with analysts.

  • Narcissistic CFOs exhibit greater levels of engagement with analysts, speak more optimistically and are more likely to use argumentative prose and corporate euphemisms.

Information from Implied Volatility Comovements and Insider Trades

with Robert Bushman and Vivek Raval (2022)

• Extant finance literature views implied volatility comovements (IVC) between a firm and the total market as a measure of priced risk due to investors' volatility aversion.

• We find evidence that IVC proxies for the degree to which a firm's incoming information is expected to correlate with that of the total market.

  • Firms with higher IVC have insider trades that are more strongly associated with future aggregate market returns.

  • Firms with higher IVC have stock returns  that inform aggregate earnings surprises.

  • Firms with higher IVC have market reactions from the total market when they disclose their own earnings.