The Phuket News Premier League predictions The Phuket News Kata Rocks The Phuket News Outrigger Koh Samui Beach Resort
The Phuket News Business News
The Phuket News Phuket | Thailand | World | Business | Q&A | Weird World XML, RSS, Feed
The Phuket News The Phuket News
The Phuket News

Phuket Business: Looking good still gets ahead

Research in sociology and psychology tells us that beauty can have a significant impact on people’s earning, job opportunities and career success and that attractive individuals generally receive better treatments in the workplace and other social settings.

economics, culture,


The Phuket News

Sunday 23 April 2017, 01:00PM


In the financial industry, good looks can bring easier access to critical information and more accurate forecast performance, as a study by CUHK Business School reveals.
In the financial industry, good looks can bring easier access to critical information and more accurate forecast performance, as a study by CUHK Business School reveals.

In the working paper “More than Skin-deep? Analysts’ Beauty and Their Performance”, Prof George Yang, Associate Profssor at the School of Accountancy of CUHK Business School, extends the study to information acquisition and forecast performance in China’s capital market. It reveals that the attractiveness of financial analysts is positively associated with their earnings forecast accuracy and stock recommendation informativeness.

“Our study aims to look at whether a predetermined attribute of a financial analyst, namely, their physical attractiveness, affects his or her success in information acquisition and job performance,” says Prof Yang who works on the study in collaboration with Prof Cao Ying, Associate Profssor of the School of Accountancy of CUHK Business School, Prof Guan Feng of Shanghai Lixin University of Commerce, as well as Prof Li Zengquan, Dean of the School of Accountancy at Shanghai University of Finance and Economics.

In capital markets, sell-side financial analysts who are generally employed by broker-dealers and investment banks, play an important role in disseminating the information on particular securities or stocks, giving investors the necessary information they need to judge the attractiveness of certain investments.

“In China, the influence of financial analysts on the stock market is even greater because the market is dominated by retail investors who are more likely to be influenced by the so-called expert opinions than institutional investors,” says Prof Yang.

Therefore, the financial analysts would actively seek out information from various sources, and the private communication with firm management is one of the critical sources, being viewed as more useful to their earnings forecasts and stock recommendations than firms’ public disclosure and even their own primary research.

Prior research already reveals that analysts who cater to the interests of managers enjoy an information advantage and exhibit superior forecast performance, according to researchers.

The Study

In the study, the researchers studied a sample of 89,056 earnings forecasts made by 2,328 analysts from 2005 to 2014. The analysts in their sample come from 102 unique brokerages, which cover all the largest brokerages in China.

At the same time, they downloaded the head-to-shoulder ID photos of all sell-side financial analysts in the sample from the website of the Securities Association of China and asked 63 raters with different education background, occupation, income, and social experience to score them on a five-point scale: 1 for homely or not good looking; 2 for below average; 3 for average; 4 for above average and; 5 for strikingly beautiful or handsome.

The 63 raters were from different settings including a Big Four accounting firm, a brokerage firm, a large private company, as well as university faculty members and students. Of the group, 27 of them are males while the rest are females.

All the raters were reminded to use the common people in the Chinese population, not the sample analysts, as the benchmark for rating and that age should not be considered in rating. Hence, the rating score would be solely based on attractiveness, not depending on how young or old he or she looks.

Lookism Matters

As expected, the study reveals that the beauty ratings of financial analysts are significantly negatively associated with their forecast errors. That is to say, more attractive analysts make more accurate forecasts.

The research team points out that their evidence suggests that more attractive financial analysts possess an advantage in acquiring information from firm management.

“Compared with other analysts, attractive analysts are more likely to gain advance access to information about pending significant corporate events, and they are more likely to issue a stock recommendation in the quarter prior to the public announcement of three types of corporate news, including restructuring, signing of important business contracts and earning warning. Accordingly, they can produce more informative stock recommendations,” says Prof Yang.

When it comes to information access, it is important to go to the right people. Again, attractive analysts have better access to them.

“Attractive analysts are more likely to get more information from corporate site visits when they can directly interact with firm management. Our results show that firm managers are more likely to disclose information to those attractive analysts,” he says.

Taste-Driven Discrimination

However, what’s interesting is that the study also shows that the beauty effect disappears when managers are allowed to trade their shares in the open market or when their firm is under a share pledge agreement.

To explore the reason behind, Prof Yang went on to find out if the effect was attributed to managers’ taste-based discrimination on the attractiveness of the analysts or on the notion that attractive people possess superior job-related skills and can better serve the interests of the firm.

If managers believe that more attractive analysts are more capable and valuable to firms, the beauty effect would persist when there is a strong incentive for managers to boost the firm performance and increase the stock value. But, the researchers didn’t find such evidence in the study.

“In other words, it suggests that managers’ discrimination among financial analysts is just taste-driven,” Prof Yang comments.

“When managers need to rely more on analysts to inform and guide the market, they are less likely to allow their taste for beauty to sway the decision about which analysts to rely on for disseminating firm information,” he explains.

Apart from the relation between analysts’ attractiveness level and their forecast performance, the study also demonstrates the impact of analysts’ attractiveness on their career opportunities. Specifically, it finds that a more attractive analyst is more likely to be voted as a star analyst who is more likely to be hired by top-notch brokerage firms even if, for some reason, he or she could only get into a smaller firm initially.

A New Challenge

While social science has documented and extensively studied the beauty effect, this study provides a new perspective into the practice by financial analysts in capital markets.

Unlike in previous research suggesting that analysts who issue favourable opinions would obtain more information from firm management, the current study documents a different incentive – the indulgence of managers’ taste for beauty, which affects the interaction between managers and financial analysts.

“Since this form of discrimination originates from psychological and social bias and is difficult to regulate, it brings new challenges to regulators and practitioners in the industry,” Prof Yang says.


This article was first published in the China Business Knowledge (CBK) by CUHK Business School with contributions from ProfGeorge Yang and ProfCao Ying, School of Accountancy, CUHK Business School. Visit bschool.cuhk.edu.hk

 

 

The Phuket News
The Phuket News
Comment on this story
* Please login to comment. If you do not have an account please register below by simply entering a username, password and email address. You can still leave your comment below at the same time.
Comments Here:
Username:
Password:
E-mail:
Security:
    Forget your password?

Be the first to comment.

The Phuket News
The Phuket News The Phuket News The Phuket News
The Phuket News
Share this
The Phuket News
Have a news tip-off? Click here
The Phuket News
Related stories
The Phuket News
Phuket community

Recent Comments


Phuket environment chief warns of poor hazardous waste disposal habits

Phuket/Thailand cannot manage it's regular waste, let alone identifying, collecting, separating and properly disposing of hazardous wastes. I wou...(Read More)


Phuket Governor says Japanese tourist bitten by barracuda not a shark

Oh brother...more stellar non-professional commentary from Phuket officials. I love the "police-type" hypothesis Mr Thatsaphol came up with....(Read More)


Phuket ‘bite’ frenzy spurs call for more protection against shark fishing

There is no enforcement for the protection of any marine life in Thai waters, it's a free for all unless you're a Korean tourist feeding bread...(Read More)


Phuket ‘bite’ frenzy spurs call for more protection against shark fishing

As a world wide diving scuba diver I can say by own experience that sharks always shy away when you 'meet' them. 'Incidents' with sha...(Read More)


City to reward people who dob in street offenders

It doesn't need to be a 'typical idiot' ( Jor12 words) to want to see police on every street corner. I often see police officers ( always...(Read More)


City to reward people who dob in street offenders

Jor 12, i guess you think lawlessness is a good idea then? Eagle, don't think it doesn't do you any good, you have no idea what i earn! 3 d...(Read More)


Phuket environment chief warns of poor hazardous waste disposal habits

Christy Sweet: You are right. It are all statements and dead end policy announcement, to justify a job, and a photo article in newspaper. Any given...(Read More)


City to reward people who dob in street offenders

malczx7r,as you are so eager to adopt it for Phuket,one might think you need it to increase your income !...(Read More)


Governor bans unsafe tour buses from Phuket, orders speed cameras for Patong Hill safety

Rorii2,I'm not surprised that you failed to understand.It was only an advice!...(Read More)


Governor bans unsafe tour buses from Phuket, orders speed cameras for Patong Hill safety

Eagle, historical facts make predicting the future easier, we all know not all predictions eventuate, but many in Thailand do, I fail to understand yo...(Read More)

The Phuket News
Bangkok Hospital Phuket
PHUKET NEWS
Phuket
Thailand
World
Business
Q A
Weird World
ARCHIVE
POLL
CURRENCY
WEATHER
PHUKET TIDE TABLE
The Phuket News PHUKET LIFE
Phuket Arts
Phuket Community
Phuket Culture
Phuket Dining
Phuket Education
Phuket Entertainment
Phuket Environment
Phuket Health
Phuket People
Phuket Technology
Phuket Travel
Photo Galleries
COLOURING BOOK
The Phuket News PHUKET SPORT
Phuket
Thailand
World
SURF REPORT
PREDICTIONS
The Phuket News PHUKET CLASSIFIEDS
Phuket Buy and Sell
Phuket Jobs
Phuket Property
Phuket Cars and Boats
Phuket Community
Phuket Services
SEARCH CLASSIFIEDS
POST CLASSIFIED
The Phuket News The Phuket News PHUKET EVENTS
Phuket Event listings
Phuket Event calendar
Buy Tickets
POST EVENT
The Phuket News PHUKET DIRECTORY
Phuket Bars, pubs and clubs
Phuket Hotels and villas
Phuket Restaurants
Phuket Yellow Pages
POST LISTING
The Phuket News BARGAINS
The Phuket News ABOUT US
The Company
Distribution points
Subscribe
Advertise with us
Pay for advert
Contact us
CONTESTS
Content Google Map
Site map
Australian Visa Services
 
Currency - The Phuket News   Weather Report - The Phuket News   Surf Report - The Phuket News
LinkedIn - The Phuket News   Twitter - The Phuket News   YouTube - The Phuket News   Facebook - The Phuket News
Copyright © 2017 Class Act Media. All rights reserved. | Website usage terms and conditions | Privacy and Confidentiality Statement.