Tuesday, October 27, 2015

Narcissism, Director Selection, And Risk-Taking Spending

ZHU David, CHEN Guoli
Access the publisher's website
Strategic Management Journal 36, 13 (2015) 2075-2098

We explain why CEOs favor new directors who are similar in narcissistic tendency or have prior experience with other similarly narcissistic CEOs. Because powerful CEOs are more able to select such individuals onto their boards, CEO power is predicted to be positively associated with the above characteristics of new directors. These associations are expected to be stronger when a new director is more different from the CEO in salient demographic characteristics. Moreover, we explain why new directors favored by CEOs are more supportive of their decision making, strengthening the positive relationship between CEO narcissism and risk-taking spending. Our findings provide considerable support for our theory. This study introduces personality theories to corporate governance research on director selection and to research on how triads influence dyadic relations.