Independent Director Networks and Executive Perquisite Consumption——“Collusion” or “Coordination” in Governance?

Yuwei Liu, Sheng Ma and Xuesong Tang

Emerging Markets Finance and Trade, 2022, vol. 58, issue 13, 3824-3839

Abstract: Prior research documents that the network of independent directors brings abundant resources and information advantages. Does it raise the possibility of executives engaging in rent-seeking? This paper investigates the specific impact of the independent director network on executive perquisite consumption in China. The results show that the more substantial the network of independent directors is, the greater the degree of executive perquisite consumption. Different ownership types result in different mechanisms; director network centrality primarily increases the entertainment component of executive perquisite consumption in SOEs, implying “cooperation in governance” and exhibiting inverted U-shaped nonlinear features; director network centrality increases the supplementary component of monetary compensation for executive perquisite consumption in nSOEs, illustrating “coordination in governance.” Moreover, the “Eight Rules” and intense external supervision effectively restrain “collusion” of SOEs.

Date: 2022
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DOI: 10.1080/1540496X.2022.2072202

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