Beauty is wealth: CEO attractiveness and firm value

Abstract

This paper examines whether and how CEO attractiveness relates to firm value. We construct a Facial Attractiveness Index of 667 CEOs based on their facial geometry. More attractive CEOs are associated with better stock returns surrounding their job announcements and around earnings-announcement news with CEOs' images. Further, more attractive CEOs are related to higher acquirer returns following acquisition announcements and higher Tobin's Q. Finally, consistent with the existing literature documenting the beauty premium in pay, more attractive CEOs receive higher compensation.

CEO beauty and management guidance

“…The final FAS for each CEO is the average of three independent test scores. The univariate distribution of the FAS in our study is comparable to that in Halford and Hsu (2020), which also use Anaface to measure facial attractiveness. Our Table 2 shows that FAS has a mean (median) of 7.468 (7.520) with a standard deviation of 0.570, whereas Table 1 in Halford and Hsu (2020) reports a mean (median) FAS of 7.251 (7.355) with a standard deviation of 0.692 for 667 S&P 500 CEOs [6].…”

“…While there are multiple channels that could connect beauty to excellence (e.g. Halford and Hsu, 2020), good-looking CEOs do not necessarily make optimal decisions (Espedal et al, 2012). On one hand, CEO facial attractiveness is associated with risky financial policies (e.g.…”

“…We retrieve digital portraits of 941 S&P 500 CEOs from their websites for the sample period between 2002 and 2012. Following Halford and Hsu (2020) and Kim et al (2021), we use the computer software Anaface to calculate CEOs' facial attractiveness scores (FAS) based on facial symmetry, facial structure and the golden ratio. Signaling genetic fitness (Jones et al, 2001), symmetric faces are viewed as being more attractive (Grammer and Thornhill, 1994;Rhodes et al, 1998;Perrett et al, 1999;Thornhill and Gangestad, 1999;Fink and Penton-Voak, 2002;Rhodes and Zebrowitz, 2002).…”

An Overview of the Literature on Upper Echelons*

“…Executives' good looks are found to be attractive for investors. Halford and Hsu (2020) show that CEO beauty is positively related to stock returns around job announcements, earnings announcements, and acquisition announcements. Since high facial masculinity can indicate high aggression and risk tolerance, male CEOs' facial masculinity has been positively related to financial misreporting by firms (Jia et al 2014) and firm risk (Ahmed et al 2019).…”

CEO Selection and Executive Appearance

“…They apply their measure, which they base on an index related to four facial features: angle of inner eyebrow ridges, face roundness, chin width, and nose-to-lip distance, to Google Images of CEOs and CFOs and find more trustworthy-appearing executives to be associated with lower audit fees. Halford and Hsu (2020) measure CEO attractiveness using a webbased facial analysis application on Anaface.com to study the relation between CEO attractiveness and shareholder reaction to their appointment and merger and acquisition decisions. To implement this, they sample each CEO six times through Anaface and take the mean of the measures.…”