Parent-subsidiary dispersion and executive excess perks consumption
Parent-subsidiary dispersion and executive excess perks consumption
We investigate the impact of parent-subsidiary dispersion on the corporate executives’ excess perks consumption using comprehensive data of 1,784 Chinese listed firms over the 2003–2017 period (i.e., total firm-year observations of 24,976). We argue that firms with greater geographic and institutional environment dispersion are subject to an acute information asymmetry problem, which makes it difficult and costly for shareholders and the public to monitor managerial actions and hence, facilitates managers to consume perks excessively. Consistent with this assertion, we find a positive relationship between parent-subsidiary company dispersion and executives’ excess perks consumption. These patterns are not likely to be driven by the firms’ endogenous choice and remain robust to various proxies for parent-subsidiary dispersion and executives’ excess perks consumption. In addition, our results also show that firms with a greater dispersion between parent and subsidiary companies have higher investor recognition. However, investor recognition does not appear to negatively impact the rate of executives’ excess perks consumption, which may explain why executives’ excess perks consumption is not mitigated in firms with greater parent-subsidiary dispersion.
China, Parent-subsidiary dispersion, corporate executives, excess perks, information asymmetry, investor recognition
Li, Bo
032bdc1a-4eff-40cd-a4c7-3907deac4663
Yao, Yao
788a2fa3-24c9-45f2-afe2-5ad2c4221cce
Shahab, Yasir
b47bf26f-bd24-48c8-beaf-5c6849bf10c2
Li, Hai-Xia
d6f17b52-94b8-40d1-b9d2-aa6b32f377a7
Ntim, Collins
1f344edc-8005-4e96-8972-d56c4dade46b
July 2020
Li, Bo
032bdc1a-4eff-40cd-a4c7-3907deac4663
Yao, Yao
788a2fa3-24c9-45f2-afe2-5ad2c4221cce
Shahab, Yasir
b47bf26f-bd24-48c8-beaf-5c6849bf10c2
Li, Hai-Xia
d6f17b52-94b8-40d1-b9d2-aa6b32f377a7
Ntim, Collins
1f344edc-8005-4e96-8972-d56c4dade46b
Li, Bo, Yao, Yao, Shahab, Yasir, Li, Hai-Xia and Ntim, Collins
(2020)
Parent-subsidiary dispersion and executive excess perks consumption.
International Review of Financial Analysis, 70, [101501].
(doi:10.1016/j.irfa.2020.101501).
Abstract
We investigate the impact of parent-subsidiary dispersion on the corporate executives’ excess perks consumption using comprehensive data of 1,784 Chinese listed firms over the 2003–2017 period (i.e., total firm-year observations of 24,976). We argue that firms with greater geographic and institutional environment dispersion are subject to an acute information asymmetry problem, which makes it difficult and costly for shareholders and the public to monitor managerial actions and hence, facilitates managers to consume perks excessively. Consistent with this assertion, we find a positive relationship between parent-subsidiary company dispersion and executives’ excess perks consumption. These patterns are not likely to be driven by the firms’ endogenous choice and remain robust to various proxies for parent-subsidiary dispersion and executives’ excess perks consumption. In addition, our results also show that firms with a greater dispersion between parent and subsidiary companies have higher investor recognition. However, investor recognition does not appear to negatively impact the rate of executives’ excess perks consumption, which may explain why executives’ excess perks consumption is not mitigated in firms with greater parent-subsidiary dispersion.
Text
Accepted_IRFA_27_April_2020_Manuscript
- Accepted Manuscript
More information
Accepted/In Press date: 27 April 2020
Published date: July 2020
Additional Information:
Funding Information:
This research was supported by National Natural Science Foundation of China (Grant Number: 71572144 ) and “Funds for High-Level Talents of Xijing University (2019)”, Grant/Award Number: XJ19B02 .
Publisher Copyright:
© 2020 Elsevier Inc.
Keywords:
China, Parent-subsidiary dispersion, corporate executives, excess perks, information asymmetry, investor recognition
Identifiers
Local EPrints ID: 439604
URI: http://eprints.soton.ac.uk/id/eprint/439604
ISSN: 1057-5219
PURE UUID: 6d028428-4c4e-4cbc-9a24-527da517358e
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Date deposited: 28 Apr 2020 16:30
Last modified: 17 Mar 2024 05:31
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Contributors
Author:
Bo Li
Author:
Yao Yao
Author:
Yasir Shahab
Author:
Hai-Xia Li
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