This study investigates whether top executive traits shape the appeal of environmentally oriented firms to institutional investors committed to the Principles for Responsible Investment (PRI). Using firms quoted on the Spanish Stock Exchange over the period 2018–2022, we analyzed how managerial narcissism and decision-making authority affect capital allocation toward green assets. The analysis further incorporated governance and demographic contingencies, including executive age and the existence of a dedicated CSR committee, as well as heterogeneity across investor locations and investment horizons. The empirical evidence indicated that elevated levels of CEO narcissism and power are associated with a lower propensity of responsible investors to hold green assets. This adverse relationship is particularly pronounced when corporate leadership is older, consistent with perceptions of weaker strategic alignment with sustainability-oriented innovation. By contrast, the presence of a CSR committee functions as a credibility-enhancing mechanism that offsets, and in some cases neutralizes, the detrimental influence of CEO traits on sustainable investment decisions. We found no systematic variation in these relationships across countries or between short- and long-term-oriented PRI investors. Overall, the findings advance the corporate governance and sustainable finance literature by highlighting how executive psychology and internal monitoring structures jointly condition investor responses to firms' environmental strategies.
Citation: M. Camino Ramon-Llorens, Jennifer Martínez-Ferrero, Emma García-Meca. 2026: Do CEO power and narcissism increase or reduce the attraction of socially responsible investing?, Green Finance, 8(1): 1-40. doi: 10.3934/GF.2026001
This study investigates whether top executive traits shape the appeal of environmentally oriented firms to institutional investors committed to the Principles for Responsible Investment (PRI). Using firms quoted on the Spanish Stock Exchange over the period 2018–2022, we analyzed how managerial narcissism and decision-making authority affect capital allocation toward green assets. The analysis further incorporated governance and demographic contingencies, including executive age and the existence of a dedicated CSR committee, as well as heterogeneity across investor locations and investment horizons. The empirical evidence indicated that elevated levels of CEO narcissism and power are associated with a lower propensity of responsible investors to hold green assets. This adverse relationship is particularly pronounced when corporate leadership is older, consistent with perceptions of weaker strategic alignment with sustainability-oriented innovation. By contrast, the presence of a CSR committee functions as a credibility-enhancing mechanism that offsets, and in some cases neutralizes, the detrimental influence of CEO traits on sustainable investment decisions. We found no systematic variation in these relationships across countries or between short- and long-term-oriented PRI investors. Overall, the findings advance the corporate governance and sustainable finance literature by highlighting how executive psychology and internal monitoring structures jointly condition investor responses to firms' environmental strategies.
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