 Government subsidies and managerial slack: Evidence from ChinaHaiyan Jiang, Kun Su and Ahsan Habib Journal of Contemporary Accounting and Economics, 2025, vol. 21, issue 2 Abstract: This paper examines the association between government subsidies and firm-level managerial slack for a sample of Chinese listed firms over the period 2005–2018. Managerial slack is the excess spending, compensation, and perquisites consumed by managers at the expense of shareholders’ wealth. Measuring managerial slack as the abnormal administrative expenses following Fang, He, and Conyon (2018) and Fang, He, and Shaw (2018), we find that government subsidies are positively associated with firms’ managerial slack. This positive association, however, is attenuated for firms with strong internal control and firms headquartered in regions with a high level of social trust. Further analysis demonstrates that the positive association is driven by firms receiving non-tax-related government subsidies. Our main result remains robust after addressing endogeneity concerns. Finally, we show that the stock market penalizes subsidy-receiving firms with high managerial slack. Keywords: Government subsidy; Managerial slack; China; State-owned enterprises; Internal control; Social trust (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:jocaae:v:21:y:2025:i:2:s1815566925000207 DOI: 10.1016/j.jcae.2025.100473 Access Statistics for this article Journal of Contemporary Accounting and Economics is currently edited by Agnes C.S. Cheng, P. Clarkson, F.A. Gul, Zoltan Matolcsy, Dan Simunic and Ben Srinidhi More articles in Journal of Contemporary Accounting and Economics from Elsevier |
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