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The external effect of institutional cross-ownership on excessive managerial perks

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  • Liu, Huan
  • Hou, Canran

Abstract

Based on the objective of portfolio value maximization, this paper focuses on the external effect of institutional cross-ownership. Empirical results show that institutional cross-ownership is negatively related to excessive managerial perks and the negative relation is more prominent for state-owned enterprises (SOEs), or central SOEs. The main conclusions are unchanged when we perform endogeneity tests and several robust checks. Further, we conduct estimations on influence mechanisms and find that institutional cross-ownership can reduce excessive managerial perks through improving information environment and corporate governance. Especially, listed firms with institutional cross-ownership can achieve better future performance. Overall, this paper enriches existing literature on institutional cross-ownership and inspires a new direction to deepen discussions on SOEs’ reforms in China.

Suggested Citation

  • Liu, Huan & Hou, Canran, 2023. "The external effect of institutional cross-ownership on excessive managerial perks," International Review of Economics & Finance, Elsevier, vol. 83(C), pages 483-501.
    • Handle: RePEc:eee:reveco:v:83:y:2023:i:c:p:483-501
    DOI: 10.1016/j.iref.2022.10.005
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    More about this item

    Keywords

    Institutional cross-ownership; Excessive managerial perks; External effect; State-owned enterprises; China;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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