Narcissistic executives and auditing practices: evidence from an emerging economy

Purpose This study examines the implications of top executives' narcissism on auditor appointment and remuneration, focusing on the association between narcissistic leadership traits and audit outcomes in the context of an emerging economy, Bangladesh. Design/methodology/approach Using a hand-collected sample of 436 firm-year observations from publicly listed firms in Bangladesh over the period 2018–2021, this study employs panel regression to examine the impact of executive narcissism on auditor selection and audit fees. Endogeneity is addressed using a combination of entropy balancing, a two-stage least squares instrumental variable approach, and the Heckman two-stage selection model. Findings The findings indicate that narcissistic chief executive officers and chairs tend to appoint geographically proximate auditors while paying higher audit fees, potentially to exert greater influence over the audit process. This behavior is more pronounced in family firms and linked to faster audit report issuance, with no evidence of improved audit quality. However, Big 4 auditors weaken the observed effect. The results remain robust across alternative measures of executive narcissism and auditor–client distance, offering novel insights into how executive traits shape corporate governance and audit outcomes. Practical implications The study underscores the need for regulatory interventions to safeguard auditor independence and uphold audit quality, particularly in settings where narcissistic executives may prioritize personal influence over organizational integrity. It further highlights the importance of auditors to carefully assess risks associated with executive personality traits when determining audit fees and providing audit services. Originality/value This research is among the first to examine the interplay between executive narcissism and auditor–client geographic proximity within an emerging economy. By extending the literature on leadership traits, corporate governance and audit outcomes, the study provides novel insights of relevance to academics, policymakers and practitioners.