What do CEOs do on vacation?

Not that much in economic terms, or so it seems according to a new paper by David Yarmack:

This paper shows connections between chief executive officers’ (CEOs’) absences from headquarters and corporate news disclosures. I identify CEO absences by merging records of corporate jet flights and CEOs’ property ownership near leisure destinations. CEOs travel to their vacation homes just after companies report favorable news, and CEOs return to headquarters right before subsequent news releases. When CEOs are away, companies announce less news, mandatory disclosures occur later, and stock volatility falls sharply. Volatility increases when CEOs return to work. CEOs spend fewer days out of the office when ownership is high and when weather is bad at their vacation homes.

The published version is here, other versions are here.  Hat tip goes to the excellent Kevin Lewis.


How did we ever get along without this sort of research?

It amazes me how these econ researchers get access to that kind of data... what network are they plugged into? Medical researchers have Medline, legal researchers have LexisNexis, what is the equivalent for economists?

Everything referenced in that abstract is publicly available (flight records, property ownership, press releases, stock prices, etc).

I'd be interested in learning what CEOs do on vacation.

Well, a lot of the European ones visiting Switzerland are doing their best to make certain that their banking and investment consultations remain private - with the full force of Swiss law helping to ensure that such privacy is enforced. (Why yes, the Swiss will arrest anyone revealing confidential banking information.)

I'd assume the popularity of several Caribbean islands was for roughly the same reason.

They see their divorce lawyer.

They dream up new ways to crush the dreams of the working class.

And that is why you are not a CEO. Crushing the dreams of the working class is so 1980. They have moved on to crushing the dreams of the middle and professional classes.

Ray, data on executives has burgeoned over recent years. There are papers that track CEO private jet flights from manifests, and many researchers have collected lots of personal information from scraping data from the web. You want a paper inferring CEO testosterone from facial dimensions, or voice pitch, and connecting that to corporate risk-taking? There's one out there. Databases tracking execs as they move from company to company to show that their strategies move along with them? We got it!

But I don't think it is right to say that CEOs and their firms don't do much on vacation. Instead, the paper shows that the firms don't REPORT much. Yet another reason it's so important to distinguish between what counts (performance) and what gets counted (performance reports). Of course, I'm biased, as What Counts and What Gets Counted is the title of my recent eBook on performance reporting.

Whoops, thought my link would work. The book is available here for free, with links to about 100 videos: http://ssrn.com/abstract=2427106.

I'm impressed by the creepily-detailed data available. I'm less impressed by the hypothesis: isn't it essentially saying that CEOs schedule their vacations (e.g., around announcements, filing deadlines, and crises) and the rest of the staff holds off on decisions while they're gone (e.g., filing 8-Ks)?

I imagine you could write a similar paper about how doctors diagnose fewer patients while on vacation, but the diagnoses they do make are much more severe. In this case though, it's blindingly obvious which way the causality runs (hint: you cannot improve your health by sending your doctor to the beach).

The original paper pitches this as a potential trading

When I read the recent biography of J.P. Morgan, I was struck by how much time he spent out of touch with the office. At the height of his power and position, he took his yacht on a cruise to Egypt. Telegraphs were waiting in port, but there was no radio and no Blackberry for several weeks at a time. He was the de facto Federal Reserve Bank at that time.

Cannot be true. Everybody knows that billionaires work harder than everyone else.

I'm just not sure what to make of the fact that "CEOs spend fewer days out of the office when ownership is high...". I would think that intoxicated ownership would be a reason to stay away from one's desk.

Depends on the drug of the ownership's choice. Perhaps that's the best time to get the plans signed off for the new corporate headquarters.

"I'd like to request seven dollars to have my push broom rebristled...."

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