Flights of Fancy: Corporate Jets, CEO Perquisites, and Inferior Shareholder Returns

48 Pages Posted: 3 Nov 2008

See all articles by David Yermack

David Yermack

New York University (NYU) - Stern School of Business

Multiple version iconThere are 2 versions of this paper

Date Written: September 2004

Abstract

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 dropby an average of 1.1 percent. Regression analysis finds no significant associations between CEOs perquisites and their compensation or percentage ownership, but variables related to personal CEO characteristics, especially long-distance golf club memberships, have significantexplanatory power for personal aircraft use.

Suggested Citation

Yermack, David, Flights of Fancy: Corporate Jets, CEO Perquisites, and Inferior Shareholder Returns (September 2004). NYU Working Paper No. FIN-04-008. Available at SSRN: https://ssrn.com/abstract=1294443

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