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Impact of perk expenditures and marketing expenditures on corporate performance in China: The moderating role of political connections

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  • Cheng, Louis T.W.
  • Chan, Ricky Y.K.
  • Leung, T.Y.

Abstract

This study examines the performance implications of guanxi-related perk expenditures among listed Chinese firms. Specifically, it investigates how these expenditures influence long-term market-based corporate performance (Tobin's Q and market share) as compared with marketing expenditures. It also examines if political connections moderate this influence. Overall, the findings suggest that guanxi-related perks play an essential marketing role in enhancing long-term corporate success. Furthermore, although marketing expenditures exert much stronger influence on Tobin's Q than guanxi-related perks do, they exert no significant influence on market share. In summary, despite firms' much heavier investments in traditional marketing activities than guanxi-related perk activities, the findings highlight the significant performance contribution that guanxi-related perks can still make to a firm. Moreover, this study reveals that political connections weaken the positive impact of guanxi-related perks on both performance measures, thus reminding executives of the dampening effect of these connections on the effective use of perk spending.

Suggested Citation

  • Cheng, Louis T.W. & Chan, Ricky Y.K. & Leung, T.Y., 2018. "Impact of perk expenditures and marketing expenditures on corporate performance in China: The moderating role of political connections," Journal of Business Research, Elsevier, vol. 86(C), pages 83-95.
    • Handle: RePEc:eee:jbrese:v:86:y:2018:i:c:p:83-95
    DOI: 10.1016/j.jbusres.2018.01.046
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