We examine how perk consumption is determined and whether it impacts firm value in China where executive pay is regulated. We find that perks are provided when the relative pay between top executives and average employees is low, in firms with high free cash flows, economic rent, and growth. Perks are positively associated with firm value, but to a much lesser extent than monetary compensation. This suggests that if perks are converted to cash compensation, shareholder wealth can be further enhanced. However, under China’s regulated compensation structure, this conversion may not be easily achieved and perks likely represent a second-best suboptimal solution in motivating executives.
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