Big Houses Mean Lousy CEOs

Bill Gates' House c/o Getty Images

An article in Slate Magazine points to an ongoing study by Crocker Liu and David Yermack  of the housing purchases of nearly every top executive in the Standard & Poor's 500 index. Their theory? The bigger the house, the worse the CEO; or as the study's authors put it:

...future company performance deteriorates when CEOs acquire extremely large or costly mansions and estates.

Their study shows that the bigger the house purchase by a CEO - the worse the companies stock performed afterwards.

Future stock performance aside, Slate author Daniel Gross confirms there are some definite perks to being the head of a large corporation.

These guys—and they're almost all guys—are living large. The mean residence of a CEO was anything but mean: 6,145 square feet, 12 rooms, 5.37 acres of land, and a market value of $3.1 million. For the 164 in the sample who bought new houses after being named CEO, the mean house was even less mean: 6,635 square feet, 13.1 rooms, 6.13 acres, and a market value of $3.9 million.

So, do large real estate purchases by a CEO really indicate a coming drop in a company's stock? Are they really a signal that the CEO is becoming "entrenched" and is no longer motivated to perform?

It seems to me this would be a perfect application of Zillow's Open API. I'd love to see if the historical sales prices or property values of these big ticket homes could be in any way correlated to the performance of a stock.

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