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Where are the Shareholders' Mansions? CEOs' Home Purchases, Stock Sales, and Subsequent Company Performance
Crocker H. Liu Arizona State University David Yermack New York University - Stern School of Business October 17, 2007 Abstract: We study real estate purchases by major company CEOs, compiling a database of the principal residences of nearly every top executive in the Standard & Poor's 500 index. When a CEO buys real estate, future company performance is inversely related to the CEO's liquidation of company shares and options for financing the transaction. We also find that, regardless of the source of finance, future company performance deteriorates when CEOs acquire extremely large or costly mansions and estates. We therefore interpret large home acquisitions as signals of CEO entrenchment. Our research also provides useful insights for calibrating utility based models of executive compensation and for understanding patterns of Veblenian conspicuous consumption.
Keywords: residential real estate, insider trading, conspicuous consumption JEL Classifications: G32, R31 Working Paper SeriesDate posted: March 15, 2007 ; Last revised: October 22, 2007Suggested CitationContact Information
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