A recent study of publicly traded CEO homes found a correlation between the size of the CEO’s home and the company’s stock price. It may come as a surprise to some, but the larger and more luxurious the CEO’s home is, the poorer the company’s stock tends to fare.
The study is an interesting one, with credit going to Arizona State Crocker Liu and New York University’s David Yermack. They allow that the purchase of a supersized luxury home could be a sign of long term commitments to both the company and the community in which they are buying.
It could also mean that the executives view the home as more important than the company which supports them.
They authors discovered that many CEO’s sell company stock just prior to its peak and use the proceeds to purchase their new luxury home along with the requisite luxury furnishings.
It appears that around one third of the 488 purchasing CEO’s studied appear to have exercised stock options and sold shares in the 12 months before buying their homes. And in most cases, the shares peaked right before the luxury home was purchased.
The study shows that at the end of 2004, the median home price of CEO home purchases was $2.7 million. And with the rise in luxury home pricing since that time, it would be safe to say that the median prices have escalated handsomely in the three years since.
A tip of the hat to Richard Beck, Associated Press
This article has 1 Comment
Comments are closed.