Nexus between corporate valuation and investment behavior: the moderating role of CEO narcissism

Purpose Nowadays, the interplay between corporate valuation and investment behavior represents a critical yet unexplored issue, demanding a deep analysis to better understand market dynamics and corporate strategies. The purpose of this study is to explore the relationship between corporate valuation and investment levels in the listed firms of an emerging market. In addition, it examines the moderating effect of chief executive officer (CEO) narcissism on the corporate valuation−corporate investment behavior relationship. Design/methodology/approach A sample of China’s Shanghai and Shenzhen A-share listed companies from 2012 to 2022 with 10,287 firm-year valid observations were used and analyzed. Findings Results indicate that effective corporate valuation leads to higher investment levels and decreases inefficient investment. However, CEO narcissistic behavior undermines the positive influence of corporate valuation on investment levels and exacerbates its adverse impact on inefficient investment. Furthermore, the research reveals that state-owned enterprises exhibit a stronger positive correlation between corporate valuation and investment levels compared to non-state-owned enterprises. In addition, CEO narcissistic behavior exacerbates the inhibition of the relationship between corporate valuation and investment levels in state-owned enterprises, while intensifying the correlation between corporate valuation and investment efficiency. Moreover, the relationship between corporate valuation and inefficient investment is particularly pronounced in state-owned enterprises. Practical implications This study yields profound insights that can enhance the investment landscape of emerging capital markets. Corporate valuation and CEO decision-making constitute pivotal aspects of the corporate governance framework, exerting a significant influence on investment levels and fostering the healthy evolution of the capital market. Originality/value This paper is a pioneer in empirically exploring the interplay between corporate valuation and investment levels and delves into the moderating role of CEO narcissism in the investment climate in emerging markets.