The relationship between CEOs’ narcissism and internal controls weaknesses

Abstract

Purpose

This study aims to investigate the relationship between chief executive officer (CEO) narcissism and internal control weaknesses in the Iranian listed companies.

Design/methodology/approach

The study’s statistical population consists of 1,309 firm-year observations from 2012 to 2018. Multivariate regression and the least squares regression are used in this study to examine the hypothesis.

Findings

The hypothesis confirms a positive and significant relationship between the CEOs’ narcissism and the internal control weaknesses (ICWs). In other words, managers with narcissistic personality traits prioritize their position, interests and goals. Therefore, there is more possibility of information distortion and denying the existing internal controls, leading to an increase in misreporting.

Originality/value

In this paper, two variables, including the manager’s signature and the managers’ cash compensation index, are used to assess the CEO’s narcissism, leading to more accurate results. This is also the first study examining CEO narcissism and internal control weaknesses, especially in the emerging market.

Citation

Salehi, M., Rajaeei, R. and Edalati Shakib, S. (2021), "The relationship between CEOs’ narcissism and internal controls weaknesses", Accounting Research Journal, Vol. 34 No. 5, pp. 429-446. https://doi.org/10.1108/ARJ-06-2020-0145