The Effect of Investors’ Perceptions and Entrepreneurs Physical Displays on Firm Forecasts, Valuation, Investment, and Survival

The CEO Beauty Premium: Founder CEO Attractiveness and Firm Valuation in Initial Coin Offerings

“…This finding is relevant for both entrepreneurship and finance literatures. While the importance of founder CEOs for early-stage ventures' outcomes and access to scarce resources (e.g., growth capital) is a stylized fact, physical attributes, such as facial attractiveness, have only been rarely addressed and have not yet been linked to performance outcomes, with very few exceptions (Baron et al, 2006;Brooks, Huang, Kearney, & Murray, 2014;Davila & Guasch, 2020;Patel & Wolfe, 2019). We extend this research by showing that ICO investors value companies led by attractive founder CEOs more highly, and are probably right to do so.…”

“…These studies suggest that in a context characterized by extreme uncertainty about firms' quality and prospects and great information asymmetries between entrepreneurs and investors, investors' decisions are based on simple but effective heuristics (their "gut feel," Huang & Pearce, 2015). Although a few previous studies (Brooks et al, 2014;Davila & Guasch, 2020) show that more attractive entrepreneurs are more likely to obtain external finance from investors than their less attractive peers, the theoretical mechanisms underlying this positive association have not been thoroughly investigated. Our study takes an important step forward in this direction by documenting that investors value firms led by more attractive founder CEOs higher when the information set on which they base their investment decisions is limited, and in doing so, they obtain higher returns.…”

“…To the best of our knowledge, Brooks et al (2014) and Davila and Guasch (2020) are the only studies concerned with the effect of entrepreneurs' physical attractiveness on fundraising. Brooks et al (2014) consider pitches presented to a panel of angel investor judges at three entrepreneurial pitch competitions in the United States.…”

“…Differences between more and less attractive female entrepreneurs were not significant. Davila and Guasch (2020) manipulate videos of entrepreneurs presenting their firms to an audience of investors. Entrepreneurs' attractiveness, judged by a set of independent raters, is positively related to the likelihood of receiving finance from professional investors.…”

The CEO beauty premium: Founder CEO attractiveness and firm valuation in initial coin offerings

“…This finding is relevant for both entrepreneurship and finance literatures. While the importance of founder CEOs for early‐stage ventures' outcomes and access to scarce resources (e.g., growth capital) is a stylized fact, physical attributes, such as facial attractiveness, have only been rarely addressed and have not yet been linked to performance outcomes, with very few exceptions (Baron et al, 2006; Brooks, Huang, Kearney, & Murray, 2014; Davila & Guasch, 2020; Patel & Wolfe, 2019). We extend this research by showing that ICO investors value companies led by attractive founder CEOs more highly, and are probably right to do so.…”