56 Pages Posted: 14 Apr 2004
Date Written: March 2005
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 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 significant explanatory power for personal aircraft use.
Keywords: Executive compensation, corporate jets, perquisites
JEL Classification: G30, J33
Suggested Citation: Suggested Citation
Yermack, David, Flights of Fancy: Corporate Jets, CEO Perquisites, and Inferior Shareholder Returns (March 2005). AFA 2005 Philadelphia Meetings. Available at SSRN: https://ssrn.com/abstract=529822 or http://dx.doi.org/10.2139/ssrn.529822
By Kevin Murphy