A recent preprint research paper by a finance professor from the Hanken School of Economics in Finland has revealed that initial coin offerings (ICOs) have a higher chance of success when the individuals leading them have faces that are perceived as more “trustworthy”.
Titled “The Value of a Smile,” the paper, authored by Professor Sinh Thoi Mai, discovered that ICOs featuring member images that ranked highly on a trustworthiness scale received up to 95% more investments compared to those at the lower end of the scale. To conduct the study, the professor manually collected data from 5,826 ICOs sourced from various outlets, amounting to a total raised capital of approximately $24 billion. The facial photos of the individuals associated with each ICO were then assessed for trustworthiness based on indicators derived from previous empirical research.
The findings revealed that ICOs with images that scored higher on the trustworthiness scale tended to raise more funds. However, this initial investor interest did not translate into long-term success. Professor Mai noted that “facial trustworthiness is negatively associated with post-ICO token cumulative return during the three months after the tokens are listed on exchanges.” This suggests that investors who are attracted to individuals with trustworthy faces may overestimate the value of ICOs, resulting in a tendency to sell off their investments quickly in the hopes of recovering losses or unrealized gains caused by overinvestment.
The study also highlighted that facial trustworthiness played a more significant role in the attractiveness of ICOs when there was limited information available. This was particularly noticeable in cases where there was minimal coding information on GitHub or more complex white papers. Investors with less technical knowledge were more inclined to rely on other indicators that they perceived as significant, such as a trustworthy smile in an image.
Ultimately, while there is no scientific evidence to support the notion that people who smile are more trustworthy, research does indicate that individuals often believe this to be true.