Getting implicit incentives right in SOEs: research on executive perks in China's anticorruption movement

The anticorruption movement since 2012 has a deep impact on Chinese social governance and economic development. This paper examines the effect of anticorruption rules on the performance of state-owned enterprises (SOEs) and suggests that perquisite consumption of SOEs has an implicit incentive for the executives. Although anticorruption rules restrict the excess perks of SOEs and reduce financial performance, it unexpectedly boosts SOEs' capital market value. A few mechanisms may be at work: (i) the diminishing marginal utility of executive perquisite consumption of SOEs; (ii) a refined macroeconomic environment leads to better performance in company value; and (iii) the decreased financing costs has a positive effect on the company value of SOEs.