Media-friendly CEOs get bigger salaries
Professor taps into unorthodox data for analysis
By Yoon Sung-won
Chief executives who frequently appear in the media tend to be paid more, according to a behavioral finance expert, Thursday.
Sungkyunkwan University’s business administration professor Andy Kim said he looked into 4,452 CEOs at 2,666 U.S. listed enterprises and 6,567 interviews by U.S. news media CNBC and 104,129 new articles about them released between 1997 and 2009.
The result showed that CEOs who are interviewed by the media frequently have a higher negotiating power and tend to receive $210,239 more in salary on average.
Kim collaborated with Nanyang Technological University (NTU) business administration professor Kang Jin-goo. The results were released in the global business administration journal Organization Science late last month.
Kim said the research also found that the positive relationship is weaker when the CEO is with a large company and is stronger when the CEO is with a company demonstrating a strong stock market performance. When the CEO is the founder of the company or holds significant shares in it, the positive relationship disappears, he added.
“Many other economists claim that the media is just a sideshow. But I thought this was not necessarily true. Media appearances by CEOs can promote what has been underestimated about the company or the CEOs themselves,” Kim said.
Kim majored in business and finance at Yonsei and Brown universities. He continued studying finance at the University of Minnesota’s Carson School of Management. He acquired his doctoral degree in finance at the same university in August 2009.
He worked as a corporate credit analyst at the Seoul branch of Bank of America between 1999 and 2001. After completing his degrees, he went to China to work as a professor at NTU in Singapore in 2009. He moved to Sungkyunkwan University in 2015 and has since lectured on finance as an assistant professor.
Kim said he started such an unorthodox project in his pursuit of unprecedented research.
“The University of Minnesota had strong faith on rational expectations. So many advised me not to look into such unorthodox research,” he said. “At NTU, however, I had many supporters for my ideas so that I could push for research projects on behavioral finance.”
In another study titled “The face of risk: CEO testosterone and risk-taking behavior,” Kim argued that a male CEO’s facial width-to-height ratio (fWHR) can predict the riskiness of his firm’s financial and investment policy.
“We found that a CEO’s fWHR is positively associated with stock return volatility, idiosyncratic risk, leverage ratio, acquisitiveness and CEO compensation,” he said. “A CEO’s personal traits can be a key predictor of his riskiness in corporate financial and investment policy.”
In 2016, Kim wrote another article titled, “Investor Psy-chology Surrounding Gangnam Style.” He said media attention drives the stock price away from fundamentals, citing the global success of rapper Psy’s “Gangnam Style” in 2012 and the change in stock price of DI Corp., a semiconductor company run by Psy’s father.
In the article, he considered the number of flashs mob and parody videos of “Gangnam Style” on YouTube in different countries as an index of individual investors’ enthusiasm.
“We found that individual investors became net buyers of DI Corp. stock when the attention level increased in their neighborhood countries,” Kim said. “Accordingly, the attention drove up the stock price by 800 percent without information on the stock’s fundamentals.”
Kim said he is currently looking into other personal factors of CEOs and their influence on business performance. He argued that CEOs with low voice tone have stronger male hormones and tend to be more risk-takers.