Narcissistic CFOs Have Big, Swoopy Signatures and Are Probably Crooks. Because Science

Forget forensic accounting, audit trails or elaborate corporate governance policies.  If you want to catch a bad chief financial officer (CFO), have them sign on the line which is dotted.

That’s the conclusion of a research paper released this month by academics at the University of Maryland and the University of North Carolina at Chapel Hill, which argues that “narcissist” CFOs have proven more likely to practice financial “misreporting” and -- more importantly -- leave clues to their evil plans on every financial document: their signature.

“To capture narcissism, prior studies have utilized measures such as the executive’s prominence in annual reports and press releases or the executive’s compensation relative to other executives,” the paper states, dismissing these measures as being influenced by external forces or just bad assumptions. “Therefore, we turn towards a measure that is at the sole discretion of the executive in question: their signature size.”

In order to get to their conclusion, the researchers “hand-collated” all available financial statements with notarized executive signatures from the U.S. Securities and Exchange Commission website and matched each executive to the firm using an external database.

They then measured the area-per-letter (APL) of the signature, matching against previous academic research that tied the APL to a person's Narcissistic Personality Inventory (NPI), a common measurement of narcissism in social psychological research.

The results showed CFOs with large, self-important signatures were more likely to manage earnings leading to financial misstatements.

Or, more simply put: financial crooks are typically narcissists, narcissistic have big signatures and therefore CFOs with oversized scribbles are likely managing earnings.

“The results indicate that CFO narcissism is associated with greater accruals-based and real earnings management, and lower conditional accounting conservatism,” the paper states “CFO narcissism is also associated with weaker internal control quality, both in terms of the probability of ineffective internal controls as well as the number of internal control weaknesses."