Bank Ownership and Executive Perquisites：.pdfVIP

Bank Ownership and Executive Perquisites: * New Evidence from an Emerging Market Wei Luo Yi Zhang Ning Zhu Peking University Peking University UC Davis Current Draft, October 2009 ABSTRACT This paper provides comprehensive description of the practice of corporate executive perquisites (perks) in China, a leading emerging economy. We find that expenses and cash payment related to corporate executive perquisites far exceed the monetary payment to top executives, consistent with the notion that perquisites are used more extensively in emerging markets to motivate and reward corporate executives. In addition to common factors known to influence the level of executive perks, we find a significantly positive link between bank ownership of company shares and executive perquisites. Further analyses suggest that higher level of executive perquisites hurt company operating efficiency and may result from the conflict of interests that banks face as both lenders and shareholders in the emerging markets: banks may choose to influence corporate executives and play less effective monitoring if they are concerned with the security of their loans or aim to obtain better arrangement for their loans. * Luo and Zhang are from Guanghua School of Management, Peking University and Zhu is from University of California, Davis. Contact information: Wei Luo, luowei@; Yi Zhang, zhangyi@; Ning Zhu, nzhu@. Part of the work was completed when Zhu was visiting Guanghua School of Management as a special-term professor. The authors wish to thank comments from Joseph Fan and seminar participants