Nihat Aktas, Eric de Bodt, Helen Bollaert, and Richard Roll have written a thought-provoking paper that examines how CEO narcissism affects the acquisition process. Here is an excerpt from their abstract, which summarizes their findings:
More narcissistic acquiring CEOs are more likely to be the initiator of the transaction. Compared to their less narcissistic peers, they also tend to negotiate faster during the private part of the process, and they are more likely to complete the transaction. Additional analyses show that target CEO narcissism is associated with higher bid premiums and lower acquirer abnormal returns. Our results make a strong case for the impact of CEO psychological characteristics on many dimensions of the takeover process.
I found these results fascinating. I understand completely how narcissistic acquiring CEOs might be deal happy. After all, one could imagine them enjoying the spotlight associated with making acquisitions, and deriving satisfaction from growing the size of their empire. The more surprising results concern the impact of narcissism on bid premiums and acquirer returns. I would have thought acquiring CEO narcissism would have the significant impact there, but in fact, it's the target CEO's narcissism that creates higher bid premiums and lower abnormal returns. The scholars explain the finding by arguing that, "Manipulative narcissistic acquiring CEOs may be able to browbeat their less narcissistic counterparts during talks." It's an interesting potential explanation. Is the lesson that we shouldn't try to do deals with narcissists? Perhaps it is!