 Perks and labor investment efficiency: Evidence from ChinaJuncheng Hu and Xiaorong Li International Review of Economics & Finance, 2024, vol. 95, issue C Abstract: This study investigates the effect of perks on future labor investment efficiency. Agency theory suggests that perks motivate managers to distort investments for personal gain. By contrast, incentive contract theory suggests that perks can be a component of incentive contracts, encouraging managers to make investments in the best interest of shareholders. Based on a sample of 12,818 firm–year observations from 2009 to 2017, we find that perks are positively related to future labor investment inefficiencies, consistent with agency theory. An exogenous reduction in executive perks caused by the 2012 anti-corruption campaign decreases labor investment inefficiencies. Further analyses show that the positive effect of perks on overinvestment predominantly occurs when firms have excessive free cash flow, low political visibility, and a less-educated workforce, whereas the positive relationship between perks and underinvestment is more prevalent. Finally, we find that perks and labor investment inefficiencies are detrimental to firm value. Keywords: Perk; Agency problem; Labor investment efficiency (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:reveco:v:95:y:2024:i:c:s1059056024004702 DOI: 10.1016/j.iref.2024.103478 Access Statistics for this article International Review of Economics & Finance is currently edited by H. Beladi and C. Chen More articles in International Review of Economics & Finance from Elsevier |
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