Corporate Jets and Private Meetings with Investors

This paper examines whether managers use corporate jets to facilitate private, face-to-face meetings with investors. We predict that flights to "money center locations are more likely to entail private meetings with investors than flights to other locations. Using a sample of almost 400,000 flights undertaken by 396 firms between 2007 and 2010, we find evidence consistent with money center flights being used to privately communicate with investors. First, we find that the number of flights to money center cities in a quarter is significantly associated with a number of proxies for incentives to privately meet with investors, such as the complexity of the firm's information, uncertainty about the firm, and a commitment to provide transparency. Second, we find significant positive abnormal absolute size-adjusted returns and abnormal share turnover during three-day windows with money center flights that are also significantly greater than during windows with flights to other cities. Finally, we find that flights to non-moneycenter cities that have a high number or percent of local firm-specific institutional ownership are associated with greater information content than flights to cities with little or no institutional ownership in the firm. Overall our evidence suggests that these private meetings are an important information event for the participating investors.