Is It a Matter of Visibility Over Viability? CEO Narcissism and the Strategic Trade‐Off in Corporate Diversification

This study examines how CEO narcissism shapes corporate diversification strategies, addressing gaps in upper echelon and agency theories. Using a sample of 388 CEOs across 319 firms, we find that narcissistic CEOs drive higher levels of overall corporate diversification but exhibit a strategic trade‐off: they strongly favor unrelated diversification for its visibility and legacy‐building potential, while showing limited engagement in related diversification to avoid exposing competence gaps. Theoretically, we advance upper echelon theory by demonstrating how narcissism's dual traits, self‐enhancement and risk aversion, shape strategic priorities, refine agency theory by linking unrelated diversification to status‐driven agency costs, and redefine managerial power by identifying narcissism as a key individual‐level determinant of executive decision‐making. Practically, we recommend that boards strengthen governance mechanisms (e.g., independent oversight, behavioral assessments) to curb narcissistic overreach in unrelated diversification while using their bold leadership for disciplined growth in related diversification.