CEO appearance, compensation, and firm performance - Evidence from Sweden

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School of Business | Master's thesis
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Abstract In my thesis I test the attributes of attractiveness, competence, likability, and trustworthiness, and investigate how these are associated with CEOs. I further analyze if there exists beauty or competence premiums among the sample CEOs, and whether the CEO characteristics explain firm performance. In other words, I analyze if more competent people look more competent and if attractiveness is an asset for CEOs. My sample consists of 140 CEOs from listed Swedish companies. I collect the primary data on CEO appearance by conducting an Internet based survey. Survey participants are asked to rate the facial photos of CEOs on a scale from 1 to 5 on each trait. Further, a pair-wise comparison is done between a CEO and a non-CEO person as well as between a large company and a small company CEO to test if large company CEOs are seen different from the control group. The results from the pair-wise comparison indicate that CEOs are seen as more attractive and competent but less likable and less trustworthy than non-CEOs. Also, large company CEOs are seen as more competent than small company CEOs, whereas small company CEOs are deemed more attractive, likable, and trustworthy. These results are not, however, statistically significant and could thus result from chance. The link between appearance and compensation is analyzed in the light of three different measures of compensation: salary, total cash compensation, and total compensation. The results from both salary and total cash compensation regressions support the existence of a beauty premium among Swedish CEOs. A competence premium exists on the salary level of CEO compensation. The study does not find a link between CEO traits and firm performance. Keywords physical appearance, beauty premium, competence premium, CEO compensation, firm performance
physical appearance, beauty premium, competence premium, CEO compensation, firm performance
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