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The University of Tennessee, Knoxville


Andy PuckettCollege of Business - Finance

Whenever a company hires someone, there is always a risk that the person will not complete his/her tasks with the level of diligence originally anticipated. This idea, that delegated managers may shirk their duties and avoid the hard work required to do an excellent job, is as old as the discipline of economics itself. However, what has largely eluded financial economists to this point is a convincing way to measure the amount of leisure consumed by delegated managers. Using golf play as a measure of leisure, we document that Chief Executive Officers (CEOs) consume more leisure when they have lower equity-based incentives (i.e., less “skin” in the game). CEOs who golf frequently (i.e., those in the top quartile of golf play, who play at least 22 rounds per year) are also associated with firms that have lower operating performance and firm values. Overall, our analyses support a conclusion that a significant fraction of public company CEOs do not work as hard as they could to maximize returns to shareholders, and that the costs of their leisure consumption to shareholders is substantial.

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