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Executive perks: Compensation and corporate performance in China

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Abstract

Many studies have examined CEO compensation in developed countries, where a long tradition of disclosure renders data readily available. In emerging economies, particularly in China, where market-based compensation is a relatively new phenomenon, there are few studies of CEO compensation. In addition, information on the use of non-cash compensation is almost absent. Building on the general literature on CEO compensation, and Chinese economic and management studies, this article singularly contributes to the extant literature by (1) examining the motivational determinants of CEO perk compensation, on the one hand, and (2) exploring the relative contribution of perks to performance. We anticipate that perks can serve two roles in China: (1) to provide incentives to deter managerial shirking, and (2) to facilitate work and improve production. We find that perks are positively associated with current and future returns on assets, supporting the view that some types of perks may improve firm profitability and/or that perks are paid as a bonus to reward performance. Our findings from stratified samples suggest that perks may incentivize managers, even after controlling for firm fundamentals, such as firm size, growth opportunity, and leverage.

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Notes

  1. Although most of the previous literature highlights the potential benefits of guanxi on firm performance and empirical evidence exists to support this argument, some researchers, such as Chen and Chen (2009), believe that guanxi may have negative effects. However, Chen and Chen (2009) do not provide any direct empirical evidence to support this conjecture.

  2. See, for example, Dale-Olsen (2007) and Yermack (2006).

  3. See, for example, Dale-Olsen (2007), Oyer (2004), and Rajan and Wulf (2006).

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Correspondence to Pattarin Adithipyangkul.

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The authors gratefully acknowledge financial support from the City University of Hong Kong. The work described in this paper was fully supported by a grant from the City University of Hong Kong (Project No. 7200060).

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Adithipyangkul, P., Alon, I. & Zhang, T. Executive perks: Compensation and corporate performance in China. Asia Pac J Manag 28, 401–425 (2011). https://doi.org/10.1007/s10490-009-9162-3

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