Market Reaction to CEOs’ Dynamic Hemifacial Asymmetry of Expressions — A Machine-Learning Approach

52 Pages Posted: 30 Mar 2021

See all articles by Rajiv D. Banker

Rajiv D. Banker

Temple University - Department of Accounting

Hui Ding

Antai College of Economics and Management, Shanghai Jiaotong University

Rong Huang

Department of Accounting, School of Management, Fudan University

Xiaorong Li

Antai College of Economics and Management, Shanghai Jiaotong University

Date Written: March 29, 2021

Abstract

Neuropsychological studies propose that listeners unconsciously assess speakers’ trustworthiness via their facial expressions. Building on this theory, we investigate how investors respond to CEOs’ dynamic hemifacial asymmetry of expressions (HFAsy) shown on CNBC’s video interviews about corporate earnings. We employ a machine-learning approach of face-detection and facial-expression-recognition based on conventional neural network to measure CEOs’ dynamic HFAsy. Consistent with the neuropsychological prediction that facial asymmetry induces distrust, we document that the stock market reacts negatively to the CEO’s HFAsy shown on the interview video. We also find that the abnormal bid-ask spread around the interview date is positively associated with the CEO’s HFAsy. We further show that these effects are more pronounced for firms with weaker information environments. Finally, we document that analyst forecast revisions are negatively associated with CEOs’ HFAsy. Overall, our study provides evidence that investor trust and trading behavior are affected by the dynamic hemifacial asymmetry of expressions appeared on CEOs’ faces.

Keywords: Hemifacial Asymmetry of Expressions, Machine Learning, Market Reaction

JEL Classification: D81, D82, D83, G12, G14, M41

Suggested Citation

Banker, Rajiv D. and Ding, Hui and Huang, Rong and Li, Xiaorong, Market Reaction to CEOs’ Dynamic Hemifacial Asymmetry of Expressions — A Machine-Learning Approach (March 29, 2021). Fox School of Business Research Paper Forthcoming, Available at SSRN: https://ssrn.com/abstract=3814689 or http://dx.doi.org/10.2139/ssrn.3814689

Rajiv D. Banker

Temple University - Department of Accounting ( email )

Philadelphia, PA 19122
United States

Hui Ding

Antai College of Economics and Management, Shanghai Jiaotong University ( email )

No. 1954, Huashan Road
Xuhui District
Shanghai, 200030
China

Rong Huang (Contact Author)

Department of Accounting, School of Management, Fudan University ( email )

670 Guoshun Rd.,
Shanghai, Shanghai
China

Xiaorong Li

Antai College of Economics and Management, Shanghai Jiaotong University ( email )

No. 1954, Huashan Road
Xuhui District
Shanghai, 200030
China

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
219
Abstract Views
792
rank
175,548
PlumX Metrics