CEOs’ Narcissism and Opportunistic Insider Trading

Abstract

Narcissism is a multifaceted personality trait that profoundly influences individuals' cognition, emotions, and actions. This study investigates the relationship between narcissistic CEOs and their engagement in opportunistic insider trading. Utilizing a quantitative measure of CEOs’ narcissism derived from textual analysis, we find that CEOs with a higher level of narcissism engage in opportunistic insider trading more intensely, thereby supporting the hypothesis of exploitative personal benefit. To mitigate concerns of endogeneity, we employ various rigorous approaches, including matching, instrumental variable, Heckman’s two-step sample selection model, and falsification tests. Through cross-sectional analysis, we find that the impact of CEOs’ narcissism on opportunistic insider trading is more pronounced among CEOs with limited legal knowledge and weaker monitoring pressure. Collectively, our findings highlight narcissism as a significant personality trait that drives CEOs’ opportunistic insider trading behaviors, contributing to a deeper understanding of corporate governance dynamics.