The face of risk: CEO facial masculinity and firm risk

Abstract

We examine whether a male CEO's facial masculinity, measured by facial width‐to‐height ratio (fWHR), predicts the riskiness of his firm. Using the face pictures of 1,162 CEOs in the Execucomp database, we find supporting evidence. Firms with more masculine‐faced CEOs have higher stock return volatility and higher financial leverage and are more acquisitive. Their frequency of acquisitions, the dollar amount spent on acquisitions, and the takeover premium are all higher. We find that more masculine‐faced CEOs’ compensation is more sensitive to the risk of the firm. The result is robust when we use AI (artificial intelligence)‐measured fWHR of the CEOs.

Beauty is wealth: CEO attractiveness and firm value

“…Recent research finds that a person's facial masculinity, measured by the facial width‐to‐height ratio, is indicative of certain behavioral traits, including confidence, aggression, risk seeking, and dominant actions. Consistent with this view, CEOs with a higher facial width‐to‐height ratio are more likely to deliberately misreport financial statements (Jia, Lent, & Zeng, 2014), increase firm risks (Kamiya, Kim, & Park, 2019), and are associated with better firm performance (Wong, Ormiston, & Haselhuhn, 2011). We find that FAI does not significantly correlate with facial width‐to‐height ratios; controlling for the facial width‐to‐height ratio does not change the positive effects of FAI on firm value.…”

“…As discussed in Section 2, existing literature documents that a person's attractiveness is related to several personal traits and characteristics. We therefore control for the following CEO characteristics: gender, age, tenure, overconfidence ( OC67 ; see Hirshleifer, Low, & Teoh, 2012), facial‐width‐to‐height ratio, which is documented to affect CEOs' risk‐taking and firm value ( fWHR ; see, e.g., Jia , Lent, & Zeng, 2014; Kamiya et al., 2019; Wong et al., 2011), a dummy variable equal to 1 if the CEO attended an Ivy League university ( Ivy ; see, e.g., Custódio et al., 2013), and a dummy variable taking the value of 1 if the CEO has an MBA degree ( MBA ).…”

Facial Structure and Achievement Drive: Evidence from Financial Analysts

“…Facial width‐to‐height ratio ( fWHR ), in particular, has garnered considerable academic and public attention because men with higher fWHR are shown to exhibit more masculine behaviors, perhaps due to testosterone influencing both facial structure and behaviors (Carré and McCormick [], Stirrat and Perrett [], Haselhuhn and Wong [], Haselhuhn et al. [], Jia, Van Lent, and Zeng [], Kamiya, Kim, and Park [], MacDonell, Geniole, and McCormick []). Many prior studies assume that the effects of testosterone on masculine behaviors are through autonomic arousal, resulting in innate masculine behaviors (i.e., the autonomic arousal hypothesis).…”

A Perusal of Managers' Optimism Pursuant to the Rate of Hormones in Blood

“…The market simulation was used to examine financial behaviors and financial decisions and the effect of hormones in most of the articles reviewed in this study (FRYDMAN et al, 2014;Kamiya et al, 2019;Peterson, 2011). It is suggested that the models of these articles be used for future research.…”

“…To collect the required information for the theoretical foundations of the research and to form a conceptual model, the latest scientific articles and books related to behavioral and neurological finance and for hormonal data, the blood test was used. It was used to identify the research variables according to (Herbert, 2018;Kamiya, Kim, & Park, 2019;Nadler & Zak, 2016;Peterson, 2011) models. To test hormones, testosterone, free testosterone, and cortisol were added to the hormones according to previous research models and thyroid hormones (T3, T4, and TSH) to expand the scope of the study.…”