This research uses data of Chinese listed companies during 2001– 2004 to test the effects of managerial power on perquisite consumption and firm performance from the perspectives of CEO duality, ownership dispersion and long-term tenure of top executives. Results show that companies with higher managerial power tend to incur higher perquisite consumption, while their performance does not improve accordingly. Moreover, perquisite consumption fails to offer effective incentives to managers, and non-state-controlled listed companies have greater managerial power, higher perquisite consumption, and worse performance than that of their state-controlled peers. Results also show that managerial power is an important factor influencing compensation incentive.