Impact of perk expenditures and marketing expenditures on corporate performance in China: The moderating role of political connections

Louis T.W. Cheng, Ricky Y.K. Chan and T.Y. Leung

Journal of Business Research, 2018, vol. 86, issue C, 83-95

Abstract: This study examines the performance implications of guanxi-related perk expenditures among listed Chinese firms. Specifically, it investigates how these expenditures influence long-term market-based corporate performance (Tobin's Q and market share) as compared with marketing expenditures. It also examines if political connections moderate this influence. Overall, the findings suggest that guanxi-related perks play an essential marketing role in enhancing long-term corporate success. Furthermore, although marketing expenditures exert much stronger influence on Tobin's Q than guanxi-related perks do, they exert no significant influence on market share. In summary, despite firms' much heavier investments in traditional marketing activities than guanxi-related perk activities, the findings highlight the significant performance contribution that guanxi-related perks can still make to a firm. Moreover, this study reveals that political connections weaken the positive impact of guanxi-related perks on both performance measures, thus reminding executives of the dampening effect of these connections on the effective use of perk spending.

Keywords: Perk; Political connection; Emerging economies; Corporate performance (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (18)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbrese:v:86:y:2018:i:c:p:83-95

DOI: 10.1016/j.jbusres.2018.01.046

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