Financial performance and tone of financial disclosures: The moderating effect of CEO narcissism

Using an experimental approach, this study shows that the effect of financial performance on tone is weaker in firms led by a more narcissistic chief executive officer (CEO) because narcissistic CEOs inflate the tone relatively more when reporting worse results. This suggests that factoring CEO narcissism into the assessment of the tone of financial disclosures is especially relevant in situations in which firms report negative financial information. Our findings demonstrate that the impact of CEO narcissism may not only exert a direct influence on firm-level outcomes, such as the tone of financial disclosures, but it could also moderate the influence of other factors.