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Table of Contents

CEO Pulchronomics and Appearance Discrimination

Jung Yeun Kim, State University of New York at Binghamton - School of Management
Linna Shi, State University of New York at Binghamton - School of Management
Nan Zhou, State University of New York at Binghamton - School of Management

Corporate CEOs, 1890–2015: Titans, Bureaucrats, and Saviors

Mark S. Mizruchi, University of Michigan at Ann Arbor - Horace H. Rackham School of Graduate Studies, University of Michigan, Stephen M. Ross School of Business
Linroy J. Marshall, University of Michigan at Ann Arbor - Department of Sociology

CEO Overconfidence and the Cost of Private Debt: Evidences from Bank Loan Contracting

Yehning Chen, National Taiwan University
Po-Hsin Ho, National Taipei University
Chih-Yung Lin, Yuan Ze University
Ju-Fang Yen, National Taipei University


CORPORATE GOVERNANCE & SOCIOLOGY OR PSYCHOLOGY eJOURNAL
Sponsored by IRRC Institute

"CEO Pulchronomics and Appearance Discrimination" 

JUNG YEUN KIM, State University of New York at Binghamton - School of Management
Email:
LINNA SHI, State University of New York at Binghamton - School of Management
Email:
NAN ZHOU, State University of New York at Binghamton - School of Management
Email:

Pulchronomics is the economics study of beauty. Given the importance of CEOs in wealth creation, we study CEO pulchronomics by first examining whether a beauty premium exists in CEO compensation. Since earnings gaps need to be accounted for differences in productivity, we also investigate whether CEO pulchritude has any effect on productivity. Due to the productivity enhancing effects of beauty, Mobius and Rosenblat (2006) argue that researchers need to identify a task that requires a true skill which is uncorrelated with physical attractiveness. We identify three CEO tasks — accounting, operations, and corporate social responsibility — that could imperfectly meet or partially satisfy this criterion. We measure CEO pulchritude via the AnaFace facial beauty analysis, which uses facial symmetry, facial structure, and the golden ratio to calculate a person’s beauty. This symmetry-based methodology is well supported by research in evolutionary biology and computer science. We find that attractive CEOs earn higher salaries, but not incentive pays, than do unattractive CEOs. Nevertheless, CEO pulchritude bears no effect on firms’ accounting, operating and social performance. Since the CEO beauty premium is not supported by the superior productivity of those attractive CEOs, we provide evidence that appearance discrimination in CEO compensation may not be justified.

"Corporate CEOs, 1890–2015: Titans, Bureaucrats, and Saviors" 
Annual Review of Sociology, Vol. 42, pp. 143-163, 2016

MARK S. MIZRUCHI, University of Michigan at Ann Arbor - Horace H. Rackham School of Graduate Studies, University of Michigan, Stephen M. Ross School of Business
Email:
LINROY J. MARSHALL, University of Michigan at Ann Arbor - Department of Sociology

Corporate chief executive officers (CEOs) have occupied important positions of power in developed societies since the nineteenth century. In this article, we describe how the nature and extent of this power has changed over time in the United States: from the corporate titans of the early twentieth century, to the bureaucratic organization men of the mid-twentieth century, to a new generation of dynamic, charismatic corporate leaders today. We discuss how the shareholder value movement in the 1980s transformed the role of the CEO and how, paradoxically, as the CEOs' compensation increased, their autonomy declined, potentially reducing their ability to focus on the long-term concerns of their firms or the larger society. We review the literature on CEO compensation, tenure, and discretionary actions, including philanthropic contributions, research and development expenditures, and political action. We conclude with a discussion of the social responsibility of contemporary corporate leaders, while pointing to the need for studies with which we can compare the views of today's CEOs with those of earlier decades.

"CEO Overconfidence and the Cost of Private Debt: Evidences from Bank Loan Contracting" Free Download

YEHNING CHEN, National Taiwan University
Email:
PO-HSIN HO, National Taipei University
Email:
CHIH-YUNG LIN, Yuan Ze University
Email:
JU-FANG YEN, National Taipei University
Email:

This paper studies whether banks charge higher or lower interest rates on loans to firms with overconfident CEOs. It establishes a theoretical model to show the relationship between the loan rate and overconfidence of the borrowing firm’s CEO. It also conducts empirical analyses to test the predictions of the model. As predicted in the model, with a hedge against the downside risk of the loan payments, banks favor firms with overconfident CEOs such that these firms enjoy lower loan rates and higher loan approval rates, especially when firms have rich firm-specific growth opportunities or during prosperous periods. Furthermore, there is evidence showing that firms with overconfident CEOs bring more future business opportunities to banks than other firms. Hence, this paper implies that banks may prefer high-risk borrowers if the future benefits from doing businesses with these borrowers are sufficiently high.

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About this eJournal

Sponsored by: IRRC Institute

This eJournal distributes working and accepted paper abstracts that deal with all aspects of governance related to sociology and psychology. The journal welcomes research with a focus on using tools and methods from the fields of sociology and psychology to study corporate governance. Topics of interest include, but are not limited to, how corporate governance arrangements are shaped by or shape social norms, psychological inclinations, and cognitive perceptions.

Authors submitting their work to the CGN network should submit it to no more than two CGN eJournals. In particular, they should submit it to no more than one "methodological" CGN eJournal (CG & Accounting; CG & Economics; CG & Finance; CG & Law; CG & Management; CG & Sociology or Psychology; CG Educator; CG Practice Series), and should submit it to no more than one of the "sub-field" journals (Acquisitions, Mergers, Contests for Control, & Activism; Actors & Players; Arrangements & Laws; Bankruptcy, Financial Distress, & Reorganization; Capital Raising, Investments, Distributions, & Market Trading; Comparative; Compensation of Executives & Directors; Economic Consequences, History, Development, & Methodology; Disclosure, Internal Control, & Risk-Management; Governance, Organization, & Processes; Governance of Special Types of Firms; International/Non-US; or Social Responsibility & Social Impact).

Editor: Lucian A. Bebchuk, Harvard University

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Directors

CGN SUBJECT MATTER EJOURNALS

LUCIAN A. BEBCHUK
Harvard Law School, National Bureau of Economic Research (NBER), Centre for Economic Policy Research (CEPR) and European Corporate Governance Institute (ECGI)
Email: bebchuk@law.harvard.edu

Please contact us at the above addresses with your comments, questions or suggestions for CGN-Sub.

Advisory Board

Corporate Governance & Sociology or Psychology eJournal

PATRICK BOLTON
Barbara and David Zalaznick Professor of Business, Columbia Business School - Department of Economics, Fellow, Centre for Economic Policy Research (CEPR), National Bureau of Economic Research (NBER), Fellow, European Corporate Governance Institute (ECGI)

BRIAN R. CHEFFINS
S.J. Berwin Professor of Corporate Law, University of Cambridge - Faculty of Law, Fellow, European Corporate Governance Institute (ECGI)

JOHN C. COFFEE
Adolf A. Berle Professor of Law and Director of the Center on Corporate Governance, Columbia Law School, Fellow, European Corporate Governance Institute (ECGI), Fellow, American Academy of Arts & Sciences

JULIAN R. FRANKS
Professor of Finance, London Business School, Fellow, Centre for Economic Policy Research (CEPR), Fellow, European Corporate Governance Institute (ECGI)

HENRY HANSMANN
Augustus E. Lines Professor of Law, Yale Law School, Fellow, European Corporate Governance Institute (ECGI)

OLIVER D. HART
Andrew E. Furer Professor of Economics, Harvard University - Department of Economics, National Bureau of Economic Research (NBER)

BENGT R. HOLMSTRÖM
Paul A. Samuelson Professor of Economics, Massachusetts Institute of Technology (MIT) - Department of Economics, National Bureau of Economic Research (NBER), European Corporate Governance Institute (ECGI)

KLAUS J. HOPT
Director (em.), Max Planck Institute for Comparative and International Private Law, European Corporate Governance Institute (ECGI)

MICHAEL C. JENSEN
Co-Founder, Chairman, Managing Director and Integrity Officer, Social Science Electronic Publishing (SSEP), Inc., Jesse Isidor Straus Professor of Business Administration, Emeritus, Harvard Business School, Research Associate, National Bureau of Economic Research (NBER), Fellow, European Corporate Governance Institute (ECGI)

HIDEKI KANDA
Professor of Law, University of Tokyo - Graduate School of Law and Politics

STEVEN NEIL KAPLAN
Neubauer Family Distinguished Service Professor of Entrepreneurship and Finance, University of Chicago - Booth School of Business, National Bureau of Economic Research (NBER)

RAKESH KHURANA
Marvin Bower Professor of Leadership Development, Harvard Business School

DAVID F. LARCKER
James Irvin Miller Professor of Accounting, Stanford University - Graduate School of Business

CHRISTIAN LEUZ
J. Sondheimer Professor of International Economics, Finance and Accounting, University of Chicago - Booth School of Business, Research Associate, National Bureau of Economic Research (NBER), Fellow, European Corporate Governance Institute (ECGI), Fellow, Center for Financial Studies (CFS), Fellow, University of Pennsylvania - Wharton Financial Institutions Center, Fellow, CESifo Research Network

MARCO PAGANO
Professor of Economics, University of Naples Federico II - Department of Economics and Statistics, Director, Centre for Studies in Economics and Finance (CSEF), President, Einaudi Institute for Economics and Finance (EIEF), Fellow, Centre for Economic Policy Research (CEPR), Fellow, European Corporate Governance Institute (ECGI)

RAGHURAM G. RAJAN
Eric J. Gleacher Distinguished Service Professor of Finance, University of Chicago - Booth School of Business, International Monetary Fund (IMF), National Bureau of Economic Research (NBER)

ROBERTA ROMANO
Sterling Professor of Law and Director, Yale Law School Center for the Study of Corporate Law, Yale Law School, Research Associate, National Bureau of Economic Research (NBER), Fellow, European Corporate Governance Institute (ECGI)

ANDREI SHLEIFER
Professor of Economics, Harvard University - Department of Economics, Fellow, National Bureau of Economic Research (NBER), Fellow, European Corporate Governance Institute (ECGI)

LAURA T. STARKS
Charles E. and Sarah M. Seay Regents Chair in Finance, University of Texas at Austin - Department of Finance

RENE M. STULZ
Everett D. Reese Chair of Banking and Monetary Economics, Ohio State University (OSU) - Department of Finance, National Bureau of Economic Research (NBER), Fellow, European Corporate Governance Institute (ECGI)

JEAN TIROLE
Scientific Director, University of Toulouse 1 - Industrial Economic Institute (IDEI), University of Toulouse 1 - Groupe de Recherche en Economie Mathématique et Quantitative (GREMAQ), Fellow, Centre for Economic Policy Research (CEPR)

LUIGI ZINGALES
Robert C. McCormack Professor of Entrepreneurship and Finance and David G. Booth Faculty Fellow, University of Chicago - Booth School of Business, National Bureau of Economic Research (NBER), Fellow, Centre for Economic Policy Research (CEPR), University of Chicago - Polsky Center for Entrepreneurship, Fellow, European Corporate Governance Institute (ECGI)