CEO Narcissism and Stock Market Reactions: An Empirical Analysis

Abstract

This bachelor thesis examines how stock markets react to CEO turnover events involving narcissistic leaders. CEO signature size is utilized as an unobtrusive, archival proxy for narcissism, and data from 341 NASDAQ-listed firms over the period 2004–2024 is analyzed. An event study methodology is applied, with cumulative abnormal returns (CAR) calculated over a (-2, +2) day window surrounding CEO appointment announcements. Regression analyses with robust standard errors are conducted to assess the relationship between CEO narcissism and stock market reactions. The results indicate that no significant relationship exists between CEO narcissism and stock price reactions at the time of appointment. However, CEO duality—where the newly appointed CEO also serves as board chair, signifying concentrated power—is found to be a significant predictor of negative market reactions. These findings suggest that investors prioritize governance structures over individual personality traits when assessing CEO appointments. It is concluded that corporate governance considerations play a more decisive role than CEO characteristics in shaping shareholder sentiment during turnover events. Since shareholders, through general meetings or proxy statements, vote on the appointment and removal of directors who select the CEO, the thesis researches whether investor preferences influence the demand for narcissistic leadership by analyzing stock market reactions to CEO appointments.

Keywords: ceo narcissism; ceo turnover; shareholder value; upper echelons theory