COLLEGE PARK, Md., July 2, 2015 /PRNewswire-USNewswire/ --
John Hancock rallied a nation with
his large autograph on the Declaration of Independence, but new
research from the University of
Maryland's Robert H. Smith
School of Business shows that signature size on corporate
financial statements can signal far less noble intentions.
The working paper, by Smith accounting professor Nick Seybert
and 2015 Smith PhD graduate Charles Ham — along with
Mark Lang and Sean Wang from the University of North Carolina at Chapel Hill's
Kenan-Flagler Business School — finds that chief financial officers
with large signatures are more willing to exploit others and bend
the truth in their favor.
Specifically, the size of CFO signatures on notarized documents
filed with the Securities and Exchange Commission predicts the
likelihood that companies will inflate their earnings and relax
internal controls. "Most importantly," Seybert says. "Financial
restatements are more likely to be needed."
The researchers were not so much interested in signature size
for its own sake, but rather as an outward measure of narcissism.
Ham, a professor at Washington
University in St. Louis,
says the first barrier to studying the personalities of corporate
executives is access. "In an ideal setting, you would be in
direct contact with executives and have them take a personality
test," he says. "But that's not usually possible."
Other researchers have tried using proxy indicators such as the
size of photographs in executive bios, but senior leaders do not
usually control such things. "A signature comes directly from the
executive," Ham says. "We used two laboratory tests to
establish the link between signature size and narcissism."
Ham says many people consider narcissism an advantage in the
C-suite. "When people think of narcissism, their first thought is
Steve Jobs," Ham says. "They think
of it as a good trait." Narcissism includes seven dimensions,
including potentially positive attributes such as self-confidence.
But the research connects signature size only to the dark
dimensions of narcissism, such as exploitativeness and
authoritativeness. "We've looked for that silver lining," Ham
says. "And we haven't found it."
Seybert says the outcome came as a surprise. "We didn't predict
at first that signature size would be related only to the dark
elements of narcissism," he says. "But that's what we found."
The team reached its conclusions after analyzing the signatures
of more than 500 CFOs. Researchers simply drew a rectangle around
the extreme points of each autograph and measured the area per
letter. Using notarized SEC statements worked well because the
documents are public and provide a standardized canvas for
comparison purposes. "We controlled for factors such as
gender, tenure and corporate history," Seybert says. "We also
measured the size of CEO signatures to determine the interplay —
and to see if it was really the CFO driving the oversight process."
Video: Big Autographs, Big Ego and the CFO…
Although CEO narcissism can hurt corporate performance —
something the same authors measured in a 2013 study — they found
that CFOs have the greatest influence on financial reporting
decisions. Besides Seybert and Ham, co-authors for the working
paper, "CFO Narcissism and Financial Reporting Quality," include
professors Mark Lang and
Sean Wang at the University of North Carolina at Chapel Hill.
Podcast: On the Trail of Narcissists
In the podcast, Seybert explains the discovery process that
allowed him and his co-authors to link narcissism with signature
size, and then signature size to CFO behavior (5:45). Additional
audio: Gender and Narcissism (1:12) | Hiring John Hancock
(0:43) | Seven Dimensions of Narcissism (1:38) | When Your Boss Has
a Big Signature (1:23)
Contacts:
Professor Nick
Seybert at nseybert@rhsmith.umd.edu
Greg Muraski, UMD-Smith media
relations, at gmuraski@rhsmith.umd.edu or
301-892-0973.
Related links:
Smith Brain
Trust: http://www.rhsmith.umd.edu/faculty-research/smithbraintrust
Twitter: @SmithBrainTrust
To view the original version on PR Newswire,
visit:http://www.prnewswire.com/news-releases/watch-out-for-cfos-with-big-john-hancocks-umd-researchers-say-300108344.html
SOURCE University of Maryland's
Robert H. Smith School of
Business