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Front. Bus. Res. China 2010, 4(3): 360379
DOI 10.1007/s11782-010-0102-3
Higher Education Press and Springer-Verlag 2010
Abstract This research uses data of Chinese listed companies during 2001 2004 to test the effects of managerial power on perquisite consumption and firm performance from the perspectives of CEO duality, ownership dispersion and long-term tenure of top executives. Results show that companies with higher managerial power tend to incur higher perquisite consumption, while their performance does not improve accordingly. Moreover, perquisite consumption fails to offer effective incentives to managers, and non-state-controlled listed companies have greater managerial power, higher perquisite consumption, and worse performance than that of their state-controlled peers. Results also show that managerial power is an important factor influencing compensation incentive.
Keywords managerial power, perquisite consumption, performance, property right
1 Introduction
Recent studies on compensation incentives have shown that corporate managers
Translated from Nankai Guanli Pinglun (Nankai Business Review), 2008, (5): 8592, 112
Rui Lu ( )
Lingnan College, Sun Yat-sen University, Guangzhou 510275, China E-mail: [email protected]
Minghai Wei
School of Business, Sun Yat-sen University, Guangzhou 510275, China E-mail: [email protected]
Wenjing Li
Management School, Jinan University, Guangzhou 510632, China E-mail: [email protected]
RESEARCH ARTICLE
Rui Lu, Minghai Wei, Wenjing Li
Managerial Power, Perquisite Consumption and the Efficiency of Property Right System: Evidence from Chinese Listed Companies
Managerial Power, Perquisite Consumption and the Efficiency of Property Right System 361
can significantly influence or even determine their own compensation, and that compensation incentives do not necessarily alleviate the prolonged agency problem. There is a possibility that managers might abuse their power to make good-intentioned compensation incentive part of the agency problem. Based on prior empirical research, Bebchuk and Fried (2002, 2003, 2004) formulated two theories concerning executive compensation: the optimal contracting approach and the managerial power approach. In their papers, managerial power usually refers to the influence managers can exert on corporate governance system including decision-making right, superintendence and execution right. Such influence can affect executive compensation contract in managers own interests. To date, much research on compensation incentives has adopted the optimal contracting approach (Wei, 2000; Li, Sun and Liu, 2005). However, considering the prevalence of insider control problem in China likely due to the absence of owner (Fei, 1996) and single big shareholder equity structure, it might be...