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Excess perks in SOEs: evidence from China
Author(s) -
Ren Xiaoyi,
Liu Xing,
Tian Zongtao
Publication year - 2020
Publication title -
asian‐pacific economic literature
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.232
H-Index - 21
eISSN - 1467-8411
pISSN - 0818-9935
DOI - 10.1111/apel.12300
Subject(s) - china , value (mathematics) , business , cash flow , monetary economics , excess return , economics , finance , geography , context (archaeology) , archaeology , machine learning , computer science
In investigating the relationship between economic directors (EDs) and excess perks in state‐owned enterprises (SOEs) in China, we find a U‐shaped relationship between the share of EDs on boards and excess perks, especially in SOEs controlled by local governments and with greater managerial power—as well as in regions with poor legal systems. The share of EDs on boards may have three benefits with respect to reducing the use of excess perks in SOEs: (1) replacing excess perks with monetary wages more aligned with the value of managers; (2) reducing the increase in excessive perks caused by the availability of free cash flow; and (3) reducing the use of excess employees to drive excess perks.