CEO narcissism and M&A decisions: the balancing effect of internal and external governance

Purpose Previous research demonstrates that CEO characteristics significantly influence managerial decisions. Drawing on upper echelons theory, we specifically examine the impact of CEO narcissism on merger and acquisition (M&A) activities and explore how internal and external governance factors moderate this relationship. Design/methodology/approach Drawing on data from European firms listed on the Stoxx 600 index between 2015 and 2019, this study primarily uses social media behaviour on LinkedIn to measure CEOs’ narcissistic traits. Signature size and relative pay are used to test the robustness of the results. Findings Highly narcissistic CEOs announce more M&A deals, with some evidence of a preference for cross-border and diversifying deals. The impact of CEO narcissism is more pronounced in firms with weaker internal governance, such as in those with larger boards. These results support previous evidence that a larger board creates opportunities for CEOs to exert greater control. Additionally, ownership concentration has a nonlinear moderating effect. The influence of CEO narcissism on M&A activity intensifies at both very low and very high levels of ownership concentration. Regarding external governance, strong shareholder power at the country level mitigates the effect of CEO narcissism on M&A. Originality/value This study advances research on how CEOs’ attributes affect M&A decisions using a more direct measure of narcissism and identifying key governance moderators. The findings offer valuable insights for regulators and shareholders in designing effective governance structures.