If you want to determine the potential of a company in a certain CEO’s hands, look out for his signature. A recent study revealed that the bigger the size of a CEO’s signature, the more likely it is that the firm will not do well. However, the CEO’s compensation will remain unconditionally high.
The report documented a positive relationship between a large signature and lower revenue forecasts and sales growth. Narcissistic CEOs tend to splurge on unnecessary capital and acquisitions, leading to poor performance during times of uncertainty. Especially for new firms which require a lot of strategic direction from the CEO for future value, the CEO’s signature size is negatively associated with current return on assets. Yet one factor remains stable throughout: narcissistic CEOs enjoy higher absolute and relative compensation regardless of the firm’s performance.
According to past research, the authors noted that signatures were an implicit measure of ego and dominance, and larger signatures were associated to high self-esteem.
The research, done by business professors at the University of Maryland and University of North Carolina, Chapel Hill, analysed the 605 CEOs’ signatures on annual Securities and Exchange Commission filings to measure CEO narcissism.
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