These are stories Report on Business is following Friday, Jan. 3, 2014.
Beauty and the (market) beast
In a new twist on an old saying, it appears that beauty may be in the eye of the shareholder.
Good-looking chief executive officers tend to earn more money, boost stock prices in their early days in the post and command a higher premium in takeovers, according to a new study.
Joseph Halford and Hung-Chia Hsu of the University of Wisconsin Milwaukee studied 677 CEOs of S&P 500 companies, using a “facial attractiveness index” in a paper updated in late 2013, and also reported today by CNBC.
“CEOs with a higher Facial Attractiveness Index are associated with better stock returns around their first days on the job, and higher acquirer returns upon acquisition announcements,” the researchers found.
“To mitigate endogeneity concerns, we compare stock returns surrounding CEAO television news events with stock returns surrounding a matched sample of news article events related to the same CEO,” they said in the abstract of the working paper.
“CEOs’ Facial Attractiveness Index positively affects the stock returns on the television news date, but not around the news article date. The findings suggest that CEO appearance matters for shareholder value and provide an explanation why more attractive CEOs receive ‘beauty premiums’ in their compensation.”
The facial attractiveness index was based on “facial geometry,” which the researchers said has been used to “relate to beauty and attractiveness” since the days of ancient Greece.
The paper cited no specific CEOs.
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