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4/19/07

11:48 AM Wow. (Note the varied comments to the video on its homepage.)

4:14 PM The statistics are as (if not more) interesting as the pictures.

8:22 PM From blog article:

In a recently-released working paper, Crocker Liu (New York University) and David Yermack (Arizona State University) have come up with a clever way of answering the question. Using data from the Fortune 500 companies, they investigate the impact on a company’s sharemarket performance when its CEO buys real estate. The idea is simple: if one of the CEO’s goals in life is to secure a grand home, then perhaps he or she won’t try so hard when the dream comes true.

So how does a CEO’s house relate to the performance of the firm? Comparing share market returns in recent years, Liu and Yermack find that firms whose CEOs have the most expensive mansions significantly underperform firms whose CEOs live in more modest residences. They find that an portfolio of ’small-home CEO’ firms would have outperformed a ‘large-home CEO’ portfolio by about 15 percent per year.

…Their point is startlingly simple: CEOs are paid proportionately to the size of their companies, and a wave of mergers has seen the largest companies become larger still. Over the past two decades, they point out, there has been a six-fold increase in market capitalization of large US companies, which perfectly explains the six-fold increase in CEO pay.

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