CEO narcissism, risk-taking, and resilience: An empirical analysis in U.S. commercial banks

T. Buyl, Christophe Boone, James B. Wade

Research output: Contribution to journalArticleScientificpeer-review

Abstract

In this study, we investigate how CEO narcissism, in combination with corporate governance practices, impacts organizational risk-taking and how this in turn affects organizations’ resilience to environmental conditions. We examine these issues in the context of the recent collapse (systemic shock) of the U.S. banking industry in September 2008, using a sample of 92 CEOs from 2006 until 2014. We find that before the shock CEO narcissism positively affected the riskiness of banks’ policies, especially when compensation policies that encourage risk-taking (stock options) are in place. The positive effect of narcissism was dampened, however, when board monitoring was more effective (because of the presence of knowledgeable outsider directors). Furthermore, we find that these preshock features hamper organizations’ resilience to (economic) shocks, as banks led by more narcissistic CEOs before the September 2008 collapse experienced a slower recovery to preshock performance levels afterwards. This effect was partially mediated by banks’ preshock riskiness of policies. We attribute these effects to the associated depletion of the organizations’ internal resources (beyond slack). Post-hoc analyses further underscore this idea, showing that the U.S. government’s capital injections through the Troubled Assets Relief Program (TARP)—resolving the “problem” of resource depletion—moderated these effects.
LanguageEnglish
Number of pages29
JournalJournal of Management
DOIs
Publication statusE-pub ahead of print - 2019

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Chief executive officer
Resilience
Commercial banks
Risk taking
Empirical analysis
Narcissism
Riskiness
Internal organization
Resources
Stock options
Corporate governance
Environmental conditions
Banking industry
Organizational impacts
Depletion
Monitoring
Assets
Performance levels
Government
Injection

Keywords

  • CEO Narcissism
  • RISK-TAKING
  • Resilience
  • Corporate Governance

Cite this

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title = "CEO narcissism, risk-taking, and resilience: An empirical analysis in U.S. commercial banks",
abstract = "In this study, we investigate how CEO narcissism, in combination with corporate governance practices, impacts organizational risk-taking and how this in turn affects organizations’ resilience to environmental conditions. We examine these issues in the context of the recent collapse (systemic shock) of the U.S. banking industry in September 2008, using a sample of 92 CEOs from 2006 until 2014. We find that before the shock CEO narcissism positively affected the riskiness of banks’ policies, especially when compensation policies that encourage risk-taking (stock options) are in place. The positive effect of narcissism was dampened, however, when board monitoring was more effective (because of the presence of knowledgeable outsider directors). Furthermore, we find that these preshock features hamper organizations’ resilience to (economic) shocks, as banks led by more narcissistic CEOs before the September 2008 collapse experienced a slower recovery to preshock performance levels afterwards. This effect was partially mediated by banks’ preshock riskiness of policies. We attribute these effects to the associated depletion of the organizations’ internal resources (beyond slack). Post-hoc analyses further underscore this idea, showing that the U.S. government’s capital injections through the Troubled Assets Relief Program (TARP)—resolving the “problem” of resource depletion—moderated these effects.",
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CEO narcissism, risk-taking, and resilience : An empirical analysis in U.S. commercial banks. / Buyl, T.; Boone, Christophe; Wade, James B.

In: Journal of Management, 2019.

Research output: Contribution to journalArticleScientificpeer-review

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