CEO Narcissism and Properties of Analysts’ Forecasts

Abstract

SYNOPSIS Using a sample of S&P 500 companies, this study constructs a measure of CEO narcissism and examines whether and how it impacts the accuracy and dispersion of analysts’ forecasts. Empirical evidence suggests that firms with narcissistic CEOs have higher accuracy and lower dispersion of such forecasts. In investigating the mechanism through which CEO narcissism impacts these properties, we find that firms with narcissistic CEOs are more likely to issue management earnings guidance, albeit less accurate, which results in significant differences in accuracy and dispersion of analysts’ forecasts. This study concludes that through more management voluntary disclosure, CEO narcissism has a positive impact on the accuracy and a negative impact on the dispersion of financial analysts’ forecasts. Although several studies have explored the effect of CEO narcissism on corporate financial reporting, this is the first study to expand such inquiry into the sector of financial analysts. JEL Classifications: G17; M12; M41.