Abstract:
The purpose of this study is to further examine the relationship between narcissism and accounting. It looks at whether CEO narcissism and corporate narcissism changes after the occurrence of a negative event to the industry. My study is based on the petroleum industry, namely the six companies comprising BP, Total, Shell, ExxonMobil, ConocoPhillips and Chevron, which suffered from the Deepwater Horizon Oil spill in April 2010. Using the methodology of Chatterjee and Hambrick (2007), I measure CEO narcissism based on the five unobtrusive indicators of narcissistic tendencies and find that there is a decrease in CEO narcissism after the negative event. Using the four factors of narcissism derived by Emmons (1987), I develop an instrument for content analysis. I examine every sentence in both the companies' annual report and sustainability report for signs of corporate narcissism. I find evidence in companies' accounting reports of corporate narcissism and that there is also a decrease after the negative event. My findings provide evidence that there exists a positive relationship between CEO narcissism and corporate narcissism, that corporate narcissism is positively related to the number of positive tone statements made in accounting reports, and that corporate narcissism drives greater positive-tone financial disclosures, which show the companies' success and achievements. Using my findings and the findings of Summerhays (2011), I provide some evidence that there exists a negative relationship between corporate narcissism and the amount of voluntary social and environmental disclosures. My study has both practical and theoretical implications as it allows users to detect signs of narcissism in accounting disclosures, allowing them to make more informed decisions as to whether to conduct financial or commercial activities with such an organization.
