CEOs’ personalities can have big impacts – both positive and negative – on the companies that they lead. Dr Richard Fairchild and Dr Pietro Perotti explain their new research on the phenomenon.
Many companies are run by CEOs with ‘larger-than-life’ personalities – and, in fact, a common trait amongst CEOs is narcissism.
There has been much research on the effects of such traits on company performance, with narcissism being seen to have both positive and negative effects.
At the same time, there has been a dearth of research on how CEO narcissism affects how external institutions (such as credit rating agencies and equity analysts) view the companies that these CEOs run.
This is where our recent research, carried out with Dr Zehan Hou from Glasgow Caledonian University Glasgow, comes in. In this study, we analysed the effect of CEO narcissism on credit ratings.
Examining signature size on company reports (a well-established measure of narcissism), we found that higher CEO narcissism resulted in lower credit ratings.
Interestingly, these results contrast results with some recent work by Ham, Piorkowski, Seybert and Wang (2025), which shows that higher CEO narcissism results in equity analysts providing higher company valuations.
We argue that our work provides an interesting complement and contrast to Ham et al.’s work – which shows that narcissistic CEOs tend to lead their companies into poor and risky value-destroying performance but, at the same time, are able to charm and hoodwink equity analysts with their puffery, and smoke and mirrors.
In other words: the higher the CEO narcissism, the worse the company performance, but the higher the equity analysts’ valuations!
Highs and lows
Our research provides an exciting complement to this We believe that this suggests that the personality types of those employed by credit rating agencies may be different to the personalities of equity analysts.
Whereas equity analysts are easily charmed and influenced by the CEO’s narcissistic behaviour, credit rating personnel appear to be more objective and immune to the puffery: indeed, they employ much more objective and formulaic methods of analysing a company’s credit rating.
Thus, when they realise that a CEO is narcissistic, they rationally downgrade the company’s performance, and correspondingly downgrade the credit rating.
Overall, our research is interesting and important, as it shows a disconnect between credit rating agencies and equity analysts when it comes to considering companies run by narcissistic CEOs.
At a practical level, this research calls for a cautious and objective approach when interacting with companies run by narcissistic CEOs: don’t fall for their soft-soap!
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