The Blessing of Trustworthy Faces: Evidence From Mutual Fund Managers

ABSTRACT

Leveraging AI technology to assess the facial trustworthiness of mutual fund managers, we examine its impact on fund performance. We find robust evidence that funds managed by individuals with higher facial trustworthiness achieve superior performance than funds managed by those with lower facial trustworthiness. This positive relation is more pronounced for male managers and those with shorter tenure in the mutual fund industry. Mechanism analyses suggest that funds managed by managers whose face is more trustworthy receive preferential treatment from investee firms and fund investors. These managers conduct corporate site visits more frequently, are more likely to meet with high‐level executives, and obtain more private information. Additional analyses reveal that facially trustworthy fund managers invest less in small investee firms and their funds experience lower redemption during temporary underperformance. Overall, our findings highlight the significance of facial appearance in the financial industry.