The Study On The Impacts Of The Internal Pay Gap On Enterprise's Total Factor Productivity

The report of the Nineteenth National Congress points out that in the context of promoting supply-side reform,improving total factor productivity is the key to achieve the high-quality development of China's economy.Enterprises are the cornerstone of promoting economic development and social progress,and become the carrier of raising the growth of total factor productivity.How to tap effectiveness the incentive mechanism of internal pay gap is a hot and difficult research topic in the field of economics and management.According to the championship theory,the intermal pay gap can effectively play the incentive role of the compensation contract,but the supporters of the behavioral theory believe that the internal pay gap will destroy the incentive effect and efficiency.Therefore,during the China's economy transitional period,clarifying the internal relationship between the internal pay gap and total factor productivity is an important part of exploring the influencing factors of total factor productivity.Under the market economy,the different human capital determines the contribution of different groups within an enterprise,which will lead to the internal pay gap.Therefore,according to the content of human capital theory,it is a necessary puzzle to reveal the influence of internal pay gap on total factor productivity by discussing the influence of the internal pay gap among different employees in enterprises.At the same time,in China's economic transition stage,the state-owned property rights and executive power have important impacts on executive compensation contracts.On the one hand,under the reform of combing executive compensation with operating performance of state-owned enterprises and a series of "salary restriction orders",the State-owned Assets Supervision and Administration Commission of the State Council further issued in June 2019 the List of Authorized Decentralization of the State Council(2019 edition)to support the market-oriented selection of professional managers in enterprises affiliated to central enterprises.Market-oriented salary distribution system should be adopted.At the same time,some studies have found that the implementation of the government's "salary limit order" has no impacts on the incentive effect of the internal pay gap.On the other hand,when the managerial power of listed companies is over-inflated,the championship salary incentive system will be correspondingly weakened.In view of this,focusing on the research perspective of internal pay gap and total factor productivity,this paper is mainly concerned with and committed to solving the following problems:Firstly,examine whether the increase of internal pay gap promotes or inhibits the improvement of total factor productivity?Secondly,based on the theory of human capital,this paper explores whether different components of internal pay gap can affect total factor productivity and whether there are significant differences in their effects.Thirdly,is there a significant moderating effect between the nature of property rights and the power of CEO on the impacts of internal pay gap on total factor productivity?As to the above problems,this paper is designed as follows:Chapter 1 is the introduction,explaining the research background and significance,the definition of relevant concepts,research objectives,research ideas and research framework,research methods and innovations of the paper.Chapter 2 is the literature review,reviewing the economic consequences of internal pay gap research and summary,the relevant literates on factors affecting total factor productivity,and summarizing the deficiencies of existing literates.Chapter 3 briefly explains the basic contents of championship theory,behavioral theory,human capital theory and management power theory,and makes theoretical analysis around the research theme of this paper.Chapter 4,Chapter 5 and Chapter 6 are the empirical test parts.Chapter 4 based on the championship theory and behavior theory,examines the impacts of the pay gap between senior managers and employees and the pay gap between senior managers on total factor productivity,and explores whether the impact is non-linear,and whether the internal pay gap is too large on total factor productivity.Chapter 5 explores and tests the mechanism of internal pay gap affecting total factor productivity from the perspective of human capital.Chapter 6 mainly examines whether there is a significant moderating effect between the nature of enterprise property rights and CEO power in the impacts of internal pay gap on total factor productivity.Chapter 7 mainly includes research conclusions,policy recommendations,research deficiencies and future research directions.The main conclusions are as follows:Conelusionl:Increasing the pay gap between managers and employees will significantly promote total factor productivity.Based on the perspective of championship theory and behavioral theory,this paper analyses the impaets of both the internal pay gap between managers and workers and the internal pay gap between managers on total factor productivity.This study finds that the increase of pay gap between top managers and employees will significantly promote the improvement of total factor productivity,and obtains the empirical evidence of championship theory.However,some scholars have found that championship theory and behavioral theory coexist in the economic consequences of the internal pay gap,and their explanatory power will change with the increase of the internal pay gap,resulting in an inverted U-shaped relationship between the internal pay gap and its economic consequences,which will affect the conclusions of this study.In view of this,the flurther research finds that the empirical test results of the inverted U-shaped relationship between the intermal pay gap and total factor productivity are not significant,but when the internal pay gap is too large,the impacts on total factor productivity are not significant.Conclusion2:Increasing executive compensation premium and employee compensation premium will significantly promote total factor productivity,but the impacts of executive compensation premium is stronger.At the same time,the increase of non-core executive compensation premium and core executive compensation premium will promote the total factor productivity,but the impacts of core executive compensation premium is stronger.With the help of human capital theory,this paper divides the pay gap between senior managers and employees into executive pay premium and employee pay premium,and divides the executive pay premium into core executive pay premium and non-core executive pay premium,and explores the mechanism of different human capital to total factor productivity.The study finds that the above two types of pay gap can significantly promote total factor productivity.At the same time,for the pay gap between executives and employees,executive pay premium has a stronger impact on total factor productivity,while for the pay gap between executives,the core executive pay premium is essential.The effect of vegetable productivity is stronger.Conclusion3:Heterogeneous of enterprises will affect the influence of internal pay gap on total factor productivity,which are:the state-owned property rights and the promotion of CEO power have significant negative moderating effects on the impacts of internal pay gap on total factor productivity.Based on the institutional background of China's economic transition and the theory of executive power,this paper explores the role of property rights in the influence of CEO power on total factor productivity.The study finds that the nature of state-owned property rights has a significant negatrive moderating effect on the impacts of internal pay gap on total factor productivity,which indicates that the incentive effect of championship theory in state-owned enterprises may be weakened.At the same time,the CEO power expansion has a significant negative moderating effect on the impacts of internal pay gap on total factor productivity,which indicates that if the CEO power is too large,the promotion of internal pay gap on total factor productivity will be restrained.There are three possible innovations in this paper:Firstly,based on China's institutional background,we should expand the theoretical research on the economic consequences of the internal pay gap.In the field of current accounting,most scholars focus on short-term financial indicators such as asset return rate to discuss the economic consequences of internal pay gap in the study of the efficiency and effectiveness of enterprise operation.With the help of the report of the Nineteenth National Congress,this paper points out that under the opportunity of improving total factor productivity,it can overcome the limitation of financial indicators to some extent by examining the influence of internal pay gap on the use of production factors and output of enterprises.At the same time,benefiting from the mandatory disclosure of executive compensation and employee compensation of listed companies in China,this paper decomposes the incentive effect of executive compensation and employee compensation with the help of human capital theory,and explores the relationship between executive compensation premium and employee compensation premium,the core executive compensation premium and non-core executive compensation premium.The effect of factor productivity can reveal the mechanism of the effect of internal pay gap on factor productivity.Secondly,focusing on the perspective of internal pay gap,systematically expanding and deepening the theoretical study of factors affecting total factor productivity.Relative to the macroeconomic perspective,there are few studies on the influencing factors of total factor productivity from the perspective of micro-economic enterprises.Micro-enterprises are the cornerstone of promoting economic development and social progress,and the internal pay gap is a hot and difficult point in business management practice and theoretical research.Therefore,this paper will make up for the deficiencies of the existing research,explore the impact of the pay gap between senior managers and employees and the pay gap between senior managers on total factor productivity,and expose the mechanism of the above-mentioned impact,so as to systematically and comprehensively deepen the impacts of internal pay gap on total factor productivity.Thirdly,it explores the moderating effect of the property right nature and CEO power on the influence of internal pay gap on total factor productivity,and deepens the influence of internal pay gap on total factor productivity.In the context of China's economic transition,under the background of successive promulgation of several "salary restriction orders",the internal pay gap of state-owned enterprises will be strictly restricted;at the same time,the corporate governance of Chinese enterprises is still in the perfect stage,and executives can use their own power and influence to widen the internal pay gap.Therefore,this paper will examine the effect of internal pay gap on total factor productivity from the perspective of property rights and CEO power,so as to deepen the impacts of internal pay gap on total factor productivity.