LAUSR

In this paper, we test the hypothesis that CEO narcissism influences firms’ hedging behaviour. Unlike rare but transformative events like acquisitions, derivative usage offers the narcissistic manager a convenient stage for bold and decisive action that generates a continuous supply of attention. It therefore represents a compelling setting for investigating whether narcissism impacts corporate policies. The empirical evidence, based on hand-collected data on derivative positions in the U.S. oil and gas industry, suggests that firms with a narcissistic CEO hedge more selectively. Furthermore, we also find that these firms reduce selective hedging comparatively more following a sharp and unexpected price collapse that sent the industry into a state of distress. This result is in line with the ‘narcissistic paradox’: while scoring high on self-esteem and grandiosity in the normal case, such individuals are also inherently fragile and liable to crumble when faced with adversity.