The Effect of CEO Narcissism on Voluntary Disclosure

Previous research has shown that providing voluntary and discretionary information by companies can help reduce investor risk. But providing this information depends on the decisions of managers. Therefore, the purpose of this study is to investigate the effect of manager’s narcissism on voluntary disclosure of company information.

With the use of data gathered in the time period of 1388 to 1397 from 135 companies listed on the Tehran’s Stock Exchange, the hypotheses tests have been performed using multiple regression.

After doing statistical analysis on CEO narcissism on voluntary disclosure of company information, the result of the hypotheses show that it has a significant and meaningful negative effects.  In this study, two indicators including: “the ratio of manager’s rewards to total salaries” and “the size of manager’s signatures” have been used to measure manager’s narcissism.  According to the result of the study, in companies where the ratio of manager’s bonuses is paid a higher percentage than other managers in other companies, as well as managers who have a larger signature size, discretionary disclosure of information is less.

The personality traits of narcissistic managers, compared to other managers, lead them to take actions that are out of the ordinary and seek the attention and praise of others, and the these actions will untimely affect the performance of the organization.  Therefore, personal prejudices and positive illusions of narcissistic managers affect the supply of financial information to the stock exchange, and therefore, these managers tend to ignore confidential negative feedback and will provide information about the company’s performance when communicating with the shareholders despite of considering the reality of the matter.  In addition these managers may knowingly miss present information to convince investors that ongoing projects have promising future. Thus, the occurrence of this phenomenon among managers will cause them to try to reduce the disclosure of voluntary information to investors and other shareholders by using different methods.