< Does big government really stunt productivity? | Main | Stone and Castro: aging irrelevances >

April 15, 2004

Corporate jets and shareholder returns

The following is the compelling synopsis of NYU finance professor David Yermack's paper, "Flights of Fancy: Corporate Jets, CEO Perquisites, and Inferior Shareholder Returns", which will not go over well in certain boardrooms:

This paper studies perquisites of major company CEOs, focusing on personal use of company planes. For firms that have disclosed this managerial benefit, average shareholder returns under-perform market benchmarks by more than 4 percent annually, a severe gap far exceeding the costs of resources consumed. Around the date of the initial disclosure, firms' stock prices drop by an average of 2 percent. Regression analysis finds negative associations between CEOs' personal aircraft use and their compensation and percentage ownership, in accord with Jensen-Meckling (1976) and Fama (1980), but both relations have small magnitude.

Hat tip to Marginal Revolution for the link.

Posted by Tom at April 15, 2004 8:22 PM |

Comments

Post a comment