I was lucky enough to write a seminar paper in New York, as part of the Zaeslin Program of the University of Basel, supervised by Prof. David Yermack.
I figure he'll have to hire bodyguards soon, as angry managers gonna start mobbing on front of his house and office.
Just last year he published a study titled: "Flights of fancy, Corporate jets, CEO perquisites, and inferior shareholder returns" (Journal of Financial Economics, 80).
Basically he showed that the private used of corporate jets by executive is very bad for you as shareholder, indeed generating inferior returns compared to a benchmark group. This was tightly related to golf club membership and golf handycap...
As Manager Magazin points out today in an article, he now went into the second round of the battle (together with Crocker Liu), analyzing the house of S&P 500 managers. Obviously, managers buying lofty houses are a definite SELL signal to investors. I haven't had the chance yet to read the study myself (which you can get free here at SSRN ), but according to Manager Magazin the key results are:
- strong outperformance of companies stocks whose managers bought smaller houses than average ( 20% abnormal return over 36month)
- strong underperformance of companies with luxury mansions bought by managers (-25%, 36Month)
I have yet to confirm these results by reading the study myself, but this sounds really impressive, compared to the small return gaps you can normally explain with event studies or return prediction models.
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