CFO facial beauty and bank loan contracting

Abstract

We test whether facial attractiveness of borrower firms’ chief financial officers (CFOs) influences bank loan contract terms, using a machine learning-based face beauty evaluation algorithm. We document that firms led by CFOs with greater facial beauty receive more favorable loan contracts from their banks, evidenced by lower loan spreads, longer maturities, fewer covenants, and a lower likelihood of collateral requirements. We conduct robustness tests for selection bias and further show that the effect of CFO facial beauty on bank loan contracts is less pronounced among larger and older firms and among firms whose CFOs have longer tenure. Our results are robust to a variety of alternate specifications and tests. Overall, we demonstrate that facial beauty has a profound impact on CFOs’ job performance.