Do Retail Investors Fall for Bad Boys? An empirical study of whether narcissistic CEOs manipulate retail investors into financial peril

Abstract

The purpose of this thesis is to investigate whether retail investment decisions are influenced by CEO personalities, and whether it has adverse financial implications. Specifically, we are interested in the notion that narcissistic CEOs exploit retail investors to finance their personal agendas, at the cost of shareholder returns. Our research question is motivated by the current media narrative, portraying CEOs, such as Elon Musk, as narcissists manipulating vulnerable retail investors. In order to provide empirical evidence, we leverage a custom narcissism index and Robinhood trading data to study a sample of CEOs from the Technology and TMT sector in the S&P 500 index. Applying a panel data regression, we find that CEO narcissism does in fact influence retail investor holdings through the moderation of media coverage, either deliberately and/or inadvertently. Contrary to the media narrative, however, we find the effect to be predominantly negative and find no evidence of adverse financial outcomes.