Companies announce good news before and after a CEO goes on vacation, and they stay quiet while he or she is gone.
A new study by David Yermack at Stern School of Business identified this trend in a study of 66 big companies.
Here are the findings for vacations of five days or more:
[A]bnormal stock returns are about 16 basis points higher than usual for each of the three days just before the CEO leaves for vacation, and about 17 basis points higher than usual for each of the three days after he returns…
realised volatility during long CEO vacations, 0.378, is about 15.6% below work-day volatility.
It’s not hard to suppose why this trend exists. CEOs like to leave on a good note; they want to have a restful vacation; and they want to take credit for any good news that happened while they were gone.
The paper published at NBER uses Boeing as a case study. This chart of W. James McNerney Jr.’s vacation days is typical of the trend:
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