The Economic Consequences of Perk Disclosure

55 Pages Posted: 19 Mar 2008 Last revised: 4 Apr 2015

Yaniv Grinstein

Cornell University - Samuel Curtis Johnson Graduate School of Management; Interdisciplinary Center (IDC) Herzliyah

David Weinbaum

Syracuse University

Nir Yehuda

University of Texas at Dallas - Department of Accounting & Information Management

Date Written: April 1, 2011

Abstract

In December 2006 the SEC issued rules that require enhanced disclosure of perquisites to managers of public U.S. firms. We find that the new disclosures had a significant effect of on shareholder value and perk practices. Firms that disclose perks for the first time in response to the rules experience significantly negative returns around the disclosure date. These firms respond to the negative returns by decreasing perk levels in the subsequent year. Firms that were already disclosing perks before the rule ratchet-up the level of perks in the subsequent year. Further, using data collected under the new disclosure regime, the level of perks is higher in firms that have fewer growth opportunities, larger amounts of free cash flow, managers with more power over the board of directors, and in firms that operate in more concentrated industries.

Keywords: CEO Compensation, Perks

JEL Classification: G12, G34, G38, J33, M41, M45

Suggested Citation

Grinstein, Yaniv and Weinbaum, David and Yehuda, Nir, The Economic Consequences of Perk Disclosure (April 1, 2011). Johnson School Research Paper Series No. 06-2011; AFA 2011 Denver Meetings Paper. Available at SSRN: https://ssrn.com/abstract=1108707 or http://dx.doi.org/10.2139/ssrn.1108707

Yaniv Grinstein (Contact Author)

Cornell University - Samuel Curtis Johnson Graduate School of Management ( email )

Sage Hall
Ithaca, NY 14853
United States
607-255-8686 (Phone)
607-254-4590 (Fax)

Interdisciplinary Center (IDC) Herzliyah ( email )

P.O. Box 167
Herzliya, 46150
Israel

David Weinbaum

Syracuse University ( email )

Syracuse, NY
United States

Nir Yehuda

University of Texas at Dallas - Department of Accounting & Information Management ( email )

2601 North Floyd Road
Richardson, TX 75083-0688
United States

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