Managerial Private Benefits and Overinvestment |
| |
| Authors: | Zhan Lei Cai Mingchao Yaoyao Wang Jing Yu |
| |
| Affiliation: | 1. School of Accounting and Finance, Zhongnan University of Economics and Law, Wuhan, China;2. Antai College of Economics and Management, Shanghai Jiaotong University, Shanghai, China;3. Pan-China Certified Public Accountants LLP, Hangzhou City, China;4. School of Economics and Management, Henan Polytechnic University, Jiaozuo, China |
| |
| Abstract: | According to agency theory, we hypothesize that underpayment of top management motivates management to overinvest. Using a sample of Chinese-listed companies for the period 2005-10, we assess the effect of managerial compensation on overinvestment and the effect of overinvestment on managerial private benefits, including future compensation and perquisites, as well as on firm performance. We find that underpayment does motivate overinvestment, which increases managerial private benefits but not firm value. |
| |
| Keywords: | managerial compensation overinvestment private benefits |
|
|
