Influencing Factors And Economic Consequences Of Managers’ Perks

With the continuous improvement of listed companies’information disclosure system in China, a growing number of listed companies begin to disclose the corresponding detail data of manager’s perks. The manager’s perks is becoming a hot topic of public opinion, aroused great interest of scholars."Perks" this hidden non-standardization remuneration experienced a dramatic expansion, which makes the study of perks has become a practical requirement placed in front of scholars. Opportunistic behaviors of managers not only do harm to business performance, but also detrimental to the interests of investors, this relates to a sustained and healthy development of capital market. Based on corporate governance, the purpose of this study is to explore the influence factors and the economic consequence of managers’perks. On the basis of empirical research, this paper presents some recommendations for enterprises to constrain managers’perks and how to improve business performance. By doing this we hope to make certain contributions to the promotion of investor protection in China’s listed companies. The research concentrates on the following issues:first, to test whether some factors will affect managers’ perks. Second, to test whether the increase of managers’perks as a kind of hidden pay will affect corporate performance negatively.Based on literature searching and theoretical analysis, this paper studies the effect on managers’perks coming from equity concentration, the proportion of independent directors, whether chairman of the board and general manager is the same person, executive pay of listed companies. Managers’perks is measured as the natural logarithm of the sum composed by office expenses, travel expenses, entertainment expenses, communication expenses, training fees in abroad, board fees, car cost, conference fees which comes from the statements of listed companies management fees. Equity concentration is measured by the top10 shareholders’proportion. Executive pay is measured by the natural logarithm of all executives’annual monetary remuneration. The corporate performance is measured by the Tobin-Q. Based on the analysis of relevant theory, this paper made the following five assumptions.(1) The proportion of independent directors has a negative relationship with managers’perks.(2) The higher equity concentration, the smaller the managers’ perks are.(3) If the chairman of the board and general manager is the same person, the managers’perks are higher.(4) Alternative relationship exists between the managers’perks and executive pay.(5) Managers’perks is constraint by executive ownership.(6)In China, managers’ perks is a kind of agency costs, rather than operational efficiency.There are472listed companies in Shenzhen Main Board of A-shares. Excluding the18suspended listed companies,8financial and insurance companies, a total of446listed companies left. Because some of the company has not disclosed the details of data required for calculation managers’perks, after data-gathering, the data of295listed companies from2009to2011is available. This paper base on a sample of295listed companies’data in the last three years, mainly using the method of empirical research testing hypotheses. First, this paper made a statistical description for each variable. The statistical results show that China’s listed companies differ a lot in managers’perks. Then, analyzed sample data in the overall regression using statistical analysis software SPSS18.0. verified the assumptions made in this paper. Besides, it supported the hypothesis made previously after the robustness test. Therefore, it can be considered a better return, and the conclusions are more in line with reality. The conclusions reached in this paper:(1) the higher the proportion of independent directors, the better the board independence is, and the more constraint role the board can play.(2) It would undermine the independence of the board if chairman and general manager is the same person. It would prevent the board of directors playing its role.(3) A certain extent of equity concentration can induce major shareholders’oversight of management, restricting its opportunistic behavior.(4) Alternative relationship exists between the managers’perks and executive pay.(5) Executive ownership did not play the role of constraining managers’perks.(6) In China, managers’perks is a kind of agency costs, rather than operational efficiency.According to the results of empirical research, this paper presents the following recommendations. First, policies require more detailed managers’ perks disclosure should be formulated. Second, to establish a budget system of managers’perks. Third, enhance the independence of the board. Improve corporate governance mechanisms to protect the interests of investors. Strengthen the internal and external audit to improve the intensity and quality of disclosure. Fourth, maintain a reasonable level of equity concentration to constrain the management behaviors against the interests of listed companies. From the company’s own internal governance mechanisms, government regulation, policies and regulations three levels to improve and achieve an effect that not only constraints management behaviors against the interests of listed companies but also restricts the expropriation of minority shareholders interests. Fifth, an appropriate increase in monetary remuneration of the executives in listed companies. Sixth, strengthen the supervision of senior management, and improve the equity incentive mechanism.