Independent Director Networks and Executive Perquisite Consumption--"Collusion" or "Coordination" in Governance?

Prior research documents that the network of independent directors brings abundant resources and information advantages. Does it raise the possibility of executives engaging in rent-seeking? This paper investigates the specific impact of the independent director network on executive perquisite consu...

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Bibliographic Details
Published in:Emerging markets finance & trade 2022-10, Vol.58 (13), p.3824-3839
Main Authors: Liu, Yuwei, Ma, Sheng, Tang, Xuesong
Format: Article
Language:English
Subjects:
collusion
coordination
executive perquisite consumption
Independent director
network centrality
Rent-seeking
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Summary:Prior research documents that the network of independent directors brings abundant resources and information advantages. Does it raise the possibility of executives engaging in rent-seeking? This paper investigates the specific impact of the independent director network on executive perquisite consumption in China. The results show that the more substantial the network of independent directors is, the greater the degree of executive perquisite consumption. Different ownership types result in different mechanisms; director network centrality primarily increases the entertainment component of executive perquisite consumption in SOEs, implying "cooperation in governance" and exhibiting inverted U-shaped nonlinear features; director network centrality increases the supplementary component of monetary compensation for executive perquisite consumption in nSOEs, illustrating "coordination in governance." Moreover, the "Eight Rules" and intense external supervision effectively restrain "collusion" of SOEs.
ISSN:1540-496X
1558-0938
DOI:10.1080/1540496X.2022.2072202