Effect of Managers' Narcissism on Speed of Adjustment of Cash with Emphasis on the Role of Managerial Ability in Tehran Stock Exchange

This study investigates the adjustment effect of management ability on the relationship between managers' narcissism and speed of adjustment of cash in the Tehran stock exchange during the period 2014 to 2020 using the information of 115 selected companies. The results of the research hypotheses showed that managers' narcissism increases the level of cash holding and thus increases the speed of adjustment of cash. This result is consistent with the theory of free cash flow, which states that people who tend to be more insecure and narcissistic about their performance in more difficult tasks are more attracted to risky growth opportunities and the challenge of keeping cash. The results also showed that the ability of management reduces the speed of adjusting cash holdings so that companies with highly capable managers prefer to maintain a lower level of cash in the company and spend the excess cash on investing in profitable projects to increase shareholder wealth. At the same time, it modulates the ability to manage the relationship between managers' narcissism and speed of adjustment of cash and reduces the intensity of the positive relationship between them. This result shows that capable managers have a better ability to predict possible future shocks than cash flow and are able to determine the optimal level of retained cash so that these managers can manage liquidity efficiently and have peaceful relationships with lenders or suppliers. They are better able to cope with low cash balances, which will reduce their motivation to raise cash levels.