CFO facial beauty and bank loan contracting

Abstract

We examine whether the facial attractiveness of borrower firms' chief financial officers (CFOs) influences bank loan contracting terms. Using a machine learning-based algorithm to measure facial attractiveness, we document that firms led by CFOs with greater facial attractiveness receive more favourable loan contracts from their banks. We further show that the relation between CFO facial attractiveness and bank loan contracting terms is significantly influenced by the characteristics of both the borrower and the lender. Collectively, our results suggest that loan contracting is not an entirely rational process, as the ‘beauty premium’ is at least partly driven by taste-based discrimination.