CEO narcissism and corporate ESG performance

Based on the psychological traits of executives, this study investigates the impact and mechanism of Chief Executive Officer (CEO) narcissism on corporate Environmental, Social and Governance (ESG) performance. Based on the upper echelons theory, we measure the degree of CEO narcissism by the size of their handwritten signatures and empirically examine whether and how CEO narcissism affects corporate ESG performance. Using the data of Chinese A-share listed companies during 2009–2022 as the research sample, this paper finds that CEO narcissism is significantly negatively correlated with corporate ESG performance. Further, the mechanism test indicates that CEO narcissism reduces firms' ESG performance mainly through three paths: lowering internal control quality, lowering information transparency and exacerbating financing constraints. The heterogeneity test finds that the negative effect of CEO narcissism on firms' ESG performance is more significant in firms with shorter CEO tenure, lower institutional ownership, firms in non-heavy pollution industries and lower media attention. In addition, the economic consequence test finds that the negative effect of CEO narcissism on ESG performance ultimately leads to a decrease in corporate performance. We adopt a CEO narcissism perspective to innovatively deconstruct the micro-level driving mechanisms behind corporate ESG performance in the Chinese context. It provides a theoretical basis for firms to improve their governance structures to constrain the adverse behaviors of narcissistic CEOs, while empowering regulatory authorities to identify the underlying psychological causes behind differences in corporate ESG performance. This has strategic value for promoting substantive ESG investments by firms.