Why it's better to have a beautiful boss

Economists suggest that having an attractive chief executive will boost the performance of a business

Marissa Mayer, chief executive and president of Yahoo, poses for VOGUE magazine (VOGUE)

Beauty is in the eye of the shareholder and hiring a good-looking chief executive can boost a company's performance, according to new research.

A study by economists Joseph T. Halford and Hung-Chia Hsu from the University of Wisconsin suggests there is a positive correlation between stock performance and attractiveness.

In their study, Beauty is Wealth: CEO Appearance and Shareholder Value, they ranked 677 chief executives from S&P 500 companies based on their facial geometry.

They found that good-looking chief executives get paid more, a so-called "beauty premium", deliver better stock returns on their first days on the job and can send shares higher when they appear on television.

"Overall, our findings suggest that more attractive CEOs receive higher compensation for a reason: They create value for shareholders through better negotiating power and visibility," the paper said.

The study also found a "positive and significant effect" of CEO attractiveness when announcing acquisitions.

Evidence suggests "that more attractive CEOs receive more surpluses for their firms from M&A transactions, a finding consistent with the hypothesis that more attractive CEOs improve shareholder value through superior negotiating prowess."

The authors of the report said Marissa Mayer, the 38-year-old president and chief executive of Yahoo!, is a good example of an attractive chief executive having a positive impact on the stock performance.

"She scored 8.45 (out of 10) in our facial attractiveness index and is among the top 5 per cent in our sample," they told business television channel CNBC. "Yahoo! has been doing well since she became the CEO."

The stock has soared since Mayer, Silicon Valley's geek goddess, took over the company in July 2012.

"Of course, we don't mean that all the increase in stock price is from her appearance. We just find that there might be some positive correlation between the two."

Halford and Hsu highlighted that beauty is not the only factor that comes into play when hiring a chief executive, insisting firms should consider other abilities.

Speaking to CNBC, they said: "Our results do not suggest that, when searching for CEOs, firms should only look at appearance without considering other abilities.

"On the other hand, for firms that rely more on the negotiation and visibility aspects, maybe they should place more weight on appearance when searching for CEOs."