Angel investment and first impressions

Xing Huang, Zoran Ivković, John Xuefeng Jiang and Isabel Yanyan Wang

Journal of Financial Economics, 2023, vol. 149, issue 2, 161-178

Abstract: We examine the role of first impressions in angel investor decision-making. Video stills of entrepreneurs pitching on the Shark Tank show and in Startup Battlefield competitions yield six measures of first impressions of entrepreneurs’ facial traits and two principal components: one that captures general ability and the other that contrasts charm and managerial ability. We find positive associations between both components and the likelihood of entrepreneurs receiving an investment offer or winning a competition round. Post-event business outcome analyses reveal that investors internalize entrepreneurs’ general ability rationally but exhibit irrational tendencies when internalizing entrepreneurs’ charm and managerial ability. Investment experience mitigates investors’ irrational use of charm and managerial ability cues.

Keywords: Angel investment; First impressions; Facial Traits; Entrepreneurship; Behavioral finance (search for similar items in EconPapers)
JEL-codes: G11 G24 G30 G32 L26 (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:149:y:2023:i:2:p:161-178

DOI: 10.1016/j.jfineco.2023.05.001

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