The unfavorable effect of CEO narcissism: The role of the
\naudit committee

Narcissism is often considered a behavioral disorder that has negative im-
\npacts, especially for top management. The audit committee, as part of the
\ngovernance system, plays a major role in suppressing such negative behav-
\nior. The purpose of this study is to examine the role of the audit committee
\nin suppressing the negative impacts of CEO narcissism. This quantitative
\nresearch uses secondary data obtained from the websites of manufacturing
\ncompanies listed on the Indonesia Stock Exchange (IDX) for the period
\n2017 – 2020, consisting of 266 companies. Sampling is conducted using
\npurpos-ive sampling method. The operational variables used in this study
\nare CEO narcissism, audit committee, and tax avoidance. The results of
\nthis study show that CEO narcissism has a negative and signiÞcant effect
\non effective tax rate (ETR). In addition, the results of this study also show
\nthat the audit committee (AC) is unable to inßuence management decisions
\nin car-rying out tax avoidance. The agency theory is unable to explain how
\nthe audit committee positions itself in narrowing asymmetry of information
\nbetween agents and principals. On the other hand, institutional theory can
\nexplain the inability of the audit committee in carrying out its monitoring
\nfunction. According to institutional theory, the existence of an audit
\ncommittee in the company is merely a formality.