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Private Equity Jets Are Smaller

Honda Motor HondaJet compact business jet in flight
Honda Motor HondaJet compact business jet in flight

Leveraged buyouts shrink jets.

Well, okay. Not literally. But a new study has found that corporate jets of companies controlled by private equity firms are 40 percent smaller than public companies.

Why do public companies fly executives around in larger jets?

One hypothesis is that it is just easier for the executives of public companies to exploit shareholders than it is for executives answerable to private equity. If you have, say, Blackstone's Steve Schwarzman breathing down your neck about every corporate expense, you're less likely to splurge on an oversized corporate jet.

In a discussion of the study at law professor Larry Ribstein's "Truth on the Market" website, the legal scholar and tort reform advocate Ted Frank raised another possibility.

"An alternative hypothesis is that public firms, to reduce adverse publicity from executive compensation, are more likely to use hidden perks than cash, and that executives prefer cash to perks," Frank wrote.

But Ribstein says this is not what's happening. The study found that private equity-controlled companies were not compensating their executives for the smaller jets. Apparently, they really are just tighter with the purse strings.

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