Invest in the best chief
If you are an investor, picking a company with a boss who’s been married twice seems to be the ideal. From The Economist April 21st 2012 print edition:
Beware of single or oft-married bosses
How many wives should a male chief executive have? (From a shareholder’s perspective, not the boss’s first wife’s.) Two is a good number, reckons Jon Moulton of Better Capital, a private-equity firm. (Maybe a boss with alimony to pay must work harder.) But three is too many. Getting divorced too often may be a sign of an unstable character.
Mr Moulton speaks from experience. (He has always lost money backing thrice-divorced managers, apparently.) Others use more rigorous methods to draw lessons from how bosses behave.
Marriage is a surprisingly good predictor of management style, reckon Nikolai Roussanov and Pavel Savor of Wharton Business School. The average unmarried boss invests 69% more than his married counterpart, they find. But his swashbuckling can be costly: the returns he generates are more volatile. This “single” effect is strongest among young bosses, unsurprisingly.
Other researchers track the travel habits of chief executives. David Yermack of Stern Business School uses corporate-jet flight data and holiday-home records to reconstruct 230 holidays of big-company bosses between 2007 and 2010. He finds that firms tend to release good news just before their bosses leave and shortly after they return, with few announcements in the middle. This may explain lower share-price volatility when the one at the wheel is away, although cause and effect are unclear. Holidays may fit around the news (some bosses fly back for crucial announcements), or vice versa.
Mr Yermack has also found that managers with a greater ownership stake in their firms take fewer holidays. More surprisingly, another of his papers shows that corporate-jet use can partly be explained by bosses’ memberships of distant golf clubs. Investors seem to have noticed. When the Securities and Exchange Commission, America’s financial watchdog, started asking in 2006 whether corporate jets were used for personal trips, the 361 firms owning up to the practice saw their shares fall.
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