Facial Structure and Achievement Drive: Evidence from Financial Analysts

• Author: HUIFANG YIN,HAILONG ZHAO,HUAI ZHANG,XIANJIE HE,YACHANG ZENG
• Published date: 01 September 2019
• DOI: http://doi.org/10.1111/1475-679X.12259
• Date: 01 September 2019

DOI: 10.1111/1475-679X.12259

Journal of Accounting Research

Vol. 57 No. 4 September 2019

Printed in U.S.A.

Facial Structure and Achievement

Drive: Evidence from Financial

Analysts

XIANJIE HE,

∗HUIFANG YIN,

∗YACHANG ZENG ,†

HUAI ZHANG,

†AND HAILONG ZHAO

‡

Received 24 December 2016; accepted 2 September 2018

ABSTRACT

We use a large pictorial sample of Chinese financial analysts to test the associ-

ation between facial width-to-height ratio (fWHR) and performance in men.

Financial analysts offer an ideal setting for our investigation because we can

objectively track individual analysts’ behaviors and performance. We find that

high-fWHR analysts are more likely to conduct corporate site visits and they

∗Shanghai University of Finance and Economics; †Nanyang Technological University;

‡Southwestern University of Finance and Economics.

Accepted by Christian Leuz. We are grateful for the constructive comments by two anony-

mous reviewers. We also appreciate helpful comments from Margaret Abernethy, Jing He,

Xue Jia, Yuping Jia, Igor Kadach, Flora Kuang, Cheryl McCormick, Laurence van Lent,

Viktoria Mileva, Bo Qin, Mohan Venkatachalam, Jin Zhang, and seminar participants at

Nanyang Technological University and the University of Melbourne. We thank Jiahui Fan,

Jingyi Wu, Xue Lai for their help in collecting the data. A previous draft of this paper

was titled “Achievement drive and analysts’ performance.” He and Yin acknowledge the fi-

nancial support from the MOE project of Key Research Institute of Humanities and So-

cial Science in University (No. 16JJD790037). Yin also acknowledges the financial support

from the National Natural Science Foundation of China (Grant No. 71302076). Zeng ac-

knowledges financial support from Singapore Ministry of Education and NTU Start-Up Grant

(RG59/17 and M4081654). Zhang acknowledges the financial support from Singapore Min-

istry of Education for providing research funding (RG75/16 and RG163/17). Zhao acknowl-

edges the financial support from the National Natural Science Foundation of China (Grant

No. 71790591). All errors are our own. An online appendix to this paper can be downloaded at

http://research.chicagobooth.edu/arc/journal-of-accounting-research/online-supplements.

1013

CUniversity of Chicago on behalf of the Accounting Research Center,2019

1014 X.HE ET AL.

exhibit better performance. The positive fWHR–performance association sur-

vives a battery of robustness checks and the association is more pronounced

for analysts with lower status, for firms with higher uncertainty, and for ana-

lysts facing more intense competition. Our results suggest that the dominant

trait predicted by fWHR is achievement drive.

JEL codes: M20; M40; M41; M50

Keywords: facial structure; achievement drive; financial analysts

1. Introduction

A nascent literature explores economic consequences of physical traits that

are important to capital market participants. Hobson, Mayew, and Venkat-

achalam [2012] and Mayew, Parsons, and Venkatachalam [2013] find that

CEOs’ voice pitch can predict their compensation levels and their likeli-

hood to misreport; whereas Addoum, Korniotis, and Kumar [2017] show

that individuals’ height and obesity influence their portfolio choices. Fa-

cial width-to-height ratio (fWHR), in particular, has garnered considerable

academic and public attention because men with higher fWHR are shown

to exhibit more masculine behaviors, perhaps due to testosterone influ-

encing both facial structure and behaviors (Carr´

e and McCormick [2008],

Stirrat and Perrett [2010], Haselhuhn and Wong [2012], Haselhuhn et al.

[2014], Jia, Van Lent, and Zeng [2014], Kamiya, Kim, and Park [2018],

MacDonell, Geniole, and McCormick [2018]). Many prior studies assume

that the effects of testosterone on masculine behaviors are through auto-

nomic arousal, resulting in innate masculine behaviors (i.e., the autonomic

arousal hypothesis). Recent research, however, suggests that testosterone is

more closely associated with achievement-striving incentives (Eisenegger,

Haushofer, and Fehr [2011], Fisk, Miller, and Overton [2017]) and hy-

pothesizes that the dominant trait predicted by fWHR is achievement drive,

which manifests behaviorally as calculated masculine behavioral traits such

as aggression, deception, and risk-taking (Lewis, Lefevre, and Bates [2012],

Lefevre et al. [2014], Welker, Goetz, and Carr´

e [2015]).1The achievement

drive hypothesis marks an important step forward in our understanding of

the association between fWHR and behaviors, because it suggests that we

may be unable to observe the positive link between fWHR and masculine

behaviors when these behaviors hinder attaining achievement.

The central testable prediction of the achievement drive hypothesis is

that individuals with higher fWHR will exert more efforts and perform bet-

ter due to their higher achievement drive. We use a large pictorial sample

of Chinese financial analysts to test this hypothesis in a naturally occurring

real business setting. This setting provides a set of key advantages for our

research. First, this setting allows us to distinguish between the autonomic

arousal hypothesis and achievement drive hypothesis. If the autonomic arousal

1Please refer to figure 1 for the illustration of the two hypotheses.

FACIAL STRUCTURE AND ACHIEVEMENT DRIVE 1015

explanation dominates, we do not expect to observe a positive relation be-

tween fWHR and analyst performance in China, because aggressive behav-

iors are socially undesirable within the collaborative workplace culture in

East Asia (Rule et al. [2010], Rule, Ishii, and Ambady [2011], Re and Rule

[2016]). If analysts with high fWHR behave aggressively, they would have

a lower likelihood of getting information from managers and other cap-

ital market participants, and consequently their performance would suf-

fer. Second, firms listed on China’sShenzhen Stock Exchange are required

to report analysts’ corporate site visit records, allowing us to directly and

objectively measure analysts’ efforts (Cheng et al. [2016]). Although the

achievement drive hypothesis predicts a positive association between fWHR

and corporate site visits, the autonomic arousal hypothesis predicts the oppo-

site: since high-fWHR analysts are more likely to take a risk and gamble on

their own information, they are less likely to conduct a corporate site visit.

Third, all Chinese financial analysts are required to register with Securities

Association of China (SAC) and provide a license ID photo. This require-

ment alleviates the concern of selection bias and the concern of measurement

errors due to bad picture quality. Fourth, the link between observable per-

formance and fWHR is tighter for our sample because an analyst’s individual

performance can be measured objectively. This compares favorably with the

setting of corporate executives, where accounting numbers of the firms are

used to gauge the executives’ performance. These numbers are subject to

managerial manipulations and may reflect the collective performance of

the management team instead of individual executives.2

We examine a sample of 1,193 male analysts, with their license ID photos

collected from the Web site of SAC. Following prior literature, we consider

male individuals only in our main analyses because the association between

fWHR and behavior has been observed for men only. As a robustness check,

we consider female analysts in subsection 7.3. Although there is computer

software that can automatically measure fWHR by detecting the position of

a certain sense organ on the picture (e.g., the eyes), we follow the predom-

inant approach in this line of literature to manually measure the analysts’

fWHR for our sample.3We measure analyst’s performance through fore-

cast accuracy (Clement and Tse [2005]). Hong and Kubik [2003] and Wu

and Zang [2009] show that more accurate forecasters are more likely to

move up the brokerage house hierarchy and be promoted to research ex-

ecutive positions; whereas Mikhail, Walther, and Willis [1999] find that an

2Wong,Ormiston, and Haselhuhn [2011] document a positive association between a CEO’s

fWHR and his financial performance (measured by the return on assets). However, this finding

might be explained by Jia, Van Lent, and Zeng [2014], who document a positive association

between upward earnings management and fWHR.

3There are two important caveats to the software-based autoapproach. First, the software

might falsely detect the organ positions if the individual on the picture wears glasses or has

a mustache (or heavy beard). Second, the software might not be able to correctly classify the

facial expression (e.g., a genuine smile or a fake smile). The failure in classifying a genuine

smile will lead to a measurement error in fWHR (Jia, Van Lent, and Zeng [2014]).