An interesting research by David Yermack (vitae) and Crocker Liu (vitae) of the Stern School of Business, NYU, has recently caused some stirr (see Business Week, Spiegel). Basically the bigger the house, sorry mansion, the worse the performance of the corporation's share price. That is of course also true if they got recently promoted and first things first, they buy a huge house, ahh, big mansion, whatever...
Initially analysts seemed baffled, but then warmed to the conclusions, because they confirm financial analysis. CEOs are like everybody and try to sell their shares at the best price. So when they sell, maybe so should you.
Regarding the study I offer a different albight compatible explanation. Purchasing a new house always requires the attention of the purchaser. And the bigger the house, sorry mansion, the more work is involved. Who buys a mansion without customizing it? And maintaining more rooms than a person needs requires additional staff, which needs to be managed...
Basically a huge house diverts the attention of the CEO who is spending a bigger share of his available time to private matters and therefore has less time for his job.
The same correlations could probably be found for hobbies, mistresses and other time consuming activities ;-)
Or the more a manager appears appears in (glossy) magazines, the more one should be worried about his business results?
I'd also bet that there is a correlation between performance and salaries/recompensations of managers. Too much is when the manager needs to spend too much time to manage his own money. How much would that be, I wonder?
Photo CC 2006 "Haunted Mansion" by John Carleton
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