Beauty is Wealth: CEO Appearance and Shareholder Value

Beauty is Wealth: CEO Appearance and Shareholder Value

Joseph Taylor Halford University of Wisconsin Milwaukee

Scott H. C. Hsu University of Wisconsin – Milwaukee

November 20, 2013

Abstract: 
This paper examines whether and how the appearance of chief executives officers (CEOs) affects shareholder value. We obtain a Facial Attractiveness Index of 677 CEOs from the S&P 500 companies based on their facial geometry. 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. To mitigate endogeneity concerns, we compare stock returns surrounding CEO television news events with stock returns surrounding a matched sample of news article events. 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.

Study finds ‘beautiful’ CEOs boost stock prices

University research says attractive chief executives are paid better and their shares perform well when the boss goes on television

Yahoo!’s Marissa Mayer was cited as an example of an attractive chief executive who has boosted share prices Photo: Rex Features

By James Titcomb

3:21PM GMT 03 Jan 2014

A university study has found that companies can boost their share prices by hiring good-looking chief executives.

Economists at the University of Wisconsin, Joseph Halford and Hung-Chia Hsu, found a positive correlation between a company’s stock performance and their chief executive’s “facial geometry”.

The study, Beauty is Wealth: CEO Appearance and Shareholder Value, used a “facial attractiveness index” to value the appearance of 677 chief executives from the S&P 500.

It found that “attractive” bosses receive better total compensation and can improve share prices on their first day by creating a good first impression. The research also suggested that they perform better on the negotiating table, and are more likely to land good deals.

Regular media appearances can also improve shares if the chief executive is attractive, the study found. “CEO attractiveness may also affect shareholder value through the visibility channel, in which media attention may affect a firm’s investor base and stock prices,” it said.

“We find that more attractive CEOs are associated with better stock returns on CEO-related television news days.”

Speaking to CNBC, the researchers said that Marissa Mayer, the 38-year-old chief executive of Yahoo!, was a good example, while being quick to stress that CEO attractiveness is only a small part of share performance.

Since Ms Mayer charge of Yahoo!, the company’s shares have risen by more than 150pc.

“She scored 8.45 (out of 10) in our facial attractiveness index and is among the top 5pc in our sample,” they said.

“Of course, we don’t mean that all the increase in stock price is from her appearance. We just find that there might be some positive correlation between the two.”