Excess perks in SOEs: evidence from China

Xiaoyi Ren, Xing Liu and Zongtao Tian

Asian-Pacific Economic Literature, 2020, vol. 34, issue 2, 152-165

Abstract: 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.

Date: 2020
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