Abstract
This study examines the relationship between air pollution and perk consumption and finds strong evidence that firms headquartered in areas with severe air pollution have higher levels of perk consumption. Two plausible mechanisms are executives' higher physiological needs for clean air and stronger bargaining power. We also find that the positive relationship between air pollution and perk consumption strengthens when it is difficult to compensate executives for their long-term air pollution exposure through monetary salaries. Additional analysis indicates that increased perk consumption may mitigate the harm of air pollution on firms' performance, supporting the incentive view of perk consumption from a new perspective of air pollution.
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