Are All Perks Solely Perks? Evidence from Corporate Jets

Forthcoming, Journal of Corporate Finance

39 Pages Posted: 3 May 2013 Last revised: 16 Jun 2018

See all articles by Lian Fen Lee

Lian Fen Lee

Boston College - Carroll School of Management

Michelle Lowry

Drexel University

Susan Shu

Boston College - Carroll School of Management

Date Written: November 20, 2017

Abstract

While shareholders have strong incentives to limit value-destroying perquisite consumption, it is challenging to identify such perquisites. Many corporate assets that enable forms of perquisite consumption also provide operational benefits. Corporate jets represent a potent example. We find business-related flights increase firm performance. Our results also highlight the channels through which jet use can either enhance or destroy firm value. Consistent with the benefits of information gathering and monitoring, firms with soft and complex information that is difficult to transmit remotely are more likely to fly to company subsidiaries and plants, and these flights positively affect firm value. In contrast, among firms with weak governance structures where flights are more likely motivated by agency factors, jet use is more likely to be value-decreasing. The ability to differentiate has important implications in today’s activism environment.

Keywords: connections, corporate jets, agency, information transfer

Suggested Citation

Lee, Lian Fen and Lowry, Michelle B. and Shu, Susan, Are All Perks Solely Perks? Evidence from Corporate Jets (November 20, 2017). Forthcoming, Journal of Corporate Finance. Available at SSRN: https://ssrn.com/abstract=2259560 or http://dx.doi.org/10.2139/ssrn.2259560

Lian Fen Lee

Boston College - Carroll School of Management ( email )

140 Commonwealth Avenue
Chestnut Hill, MA 02467
United States

Michelle B. Lowry (Contact Author)

Drexel University ( email )

Philadelphia, PA 19104
United States
215-895-6070 (Phone)

Susan Shu

Boston College - Carroll School of Management ( email )

Boston College
140 Commonwealth Ave.
Chestnut Hill, MA 02167
United States
617-552-1759 (Phone)

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