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http://ssrn.com/abstract=546291
 
 

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Are Perks Purely Managerial Excess?


Raghuram G. Rajan


University of Chicago - Booth School of Business; International Monetary Fund (IMF); National Bureau of Economic Research (NBER)

Julie Wulf


Harvard Business School

May 2004

NBER Working Paper No. w10494

Abstract:     
Why do some firms tend to offer executives a variety of perks while others offer none at all? A widespread view in the corporate finance literature is that executive perks are a form of agency or private benefit and a way for managers to misappropriate some of the surplus the firm generates. According to this view, firms with plenty of free cash flow that operate in industries with limited investment prospects should typically offer perks. The theory also suggests that firms that are subject to more external monitoring should have fewer perks. Overall, the evidence for the private benefits explanation is, at best, mixed. We do, however, find evidence that perks are offered most in situations where they are likely to enhance managerial productivity. This suggests that a view of perks that sees them purely as managerial excess is incorrect.

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Date posted: May 28, 2004  

Suggested Citation

Rajan, Raghuram G. and Wulf, Julie, Are Perks Purely Managerial Excess? (May 2004). NBER Working Paper No. w10494. Available at SSRN: http://ssrn.com/abstract=546291

Contact Information

Raghuram G. Rajan (Contact Author)
University of Chicago - Booth School of Business ( email )
5807 S. Woodlawn Avenue
Chicago, IL 60637
United States
773-702-4437 (Phone)
773-702-0458 (Fax)
International Monetary Fund (IMF) ( email )
700 19th Street NW
Washington, DC 20431
United States
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
773-702-9299 (Phone)
773-702-0458 (Fax)
Julie M. Wulf
Harvard Business School ( email )
Harvard Business School
Boston, MA
United States
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