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Agency Problems in Public Firms: Evidence from Corporate Jets in Leveraged Buyouts



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    • Federal Reserve Board. Any views expressed here are those of the author and need not represent the views of the Federal Reserve Board or its staff. I thank Bo Becker; Mark Carey; Alex Edmans; Xavier Gabaix; Jerry Hausman; Erik Heitfield; George Korniotis; Amanda Kowalski; David Lebow; Josh Lerner; Raven Saks Molloy; Stew Myers; Matthias Osthoff; Rick Ruback; Johannes Spinnewijn; Julie Wulf; Cam Harvey (the Editor); an anonymous referee; an Associate Editor; and seminar participants at the Federal Reserve Board, Dartmouth Tuck, Harvard Business School, Columbia Business School, Duke Fuqua, the NBER Summer Institute, and the AFA Annual Meeting for helpful comments or conversations. I thank Alejandro Companioni and Geoffrey Barnes for excellent research assistance. I am responsible for any errors.


This paper uses novel data to examine the fleets of corporate jets operated by both publicly traded and privately held firms. In the cross-section, firms owned by private equity funds average 40% smaller fleets than observably similar public firms. Similar fleet reductions are observed within firms that undergo leveraged buyouts. Quantile regressions indicate that these results are driven by firms in the upper 30% of the conditional jet distribution. The results thus suggest that executives in a substantial minority of public firms enjoy excessive perquisite and compensation packages.