Study On The Correlation Between Remuneration Gap Within The Management Team And Company Performance

Business executives are the most important and most special human resources, playing a key role in the development of enterprises. The enthusiasm of business executives relies heavily on the effectiveness of incentives. Thus, corporate executives'remuneration incentive is a hot topic of both the theoretical and practice discussions. Current research of domestic and foreign scholars on the relationship between executive pay and company performance is more mature, but the research on relationship between pay gap within top management team and company performance has not reached consensus. Moreover, in-depth research of the service sector is very scarce. The article verifies the relationship between pay gap within top executives and company performance and find more suitable theory to explain the relationship in domestic service industry.With our government's policy issued to support services, China's service industry is developing rapidly, and the relationship between pay gap within executives team and company performance is becoming widely focused in sociology. This theory is based on the representative theory of the pay gap: tournament theory and behavior theory. Basing on this theory, the author attempts to use empirical research to demonstrate which theory can better explain the relationship between executive pay gap and the performance in service industries under the context of economic restructuring, so to guide China's service sector companies to implement the strategy pay plan. Most past research on the relationship between pay gap and performance of the company used cross-sectional data in the same period, but this paper broke this limit and collected a panel data of service sector companies listed on the Shanghai Stock Exchange during 2005 to 2009 as the study sample, excluded multi-variable and used fixed. effects panel econometric model for regression analysis. The results showed that tournament theory is more convincing to explain the relationship between executive pay gap in China services listed companies and company performance at least at the 5% level significance. To exclude some of the more obvious factors in China, the paper has conducted a sub-regional, sub-optional comparative study and the result remains significant. Specific content can be divided into five chapters:ChapterⅠ, Introduction. This section first introduced the research background, purpose, significance, and then reviewed the domestic and foreign research on the relationship between pay gap within senior executives team and the company performance, and finally briefly look at the overall framework of this article.ChapterⅡ, theoretical analysis. This section first defines the concept of the main term in the paper, including the management team, executive pay gap, and service industries; second describes the theoretical basis of this article-tournament theory and behavior theory.ChapterⅢ, variable selection and research hypothesis. Drawing on the basis of previous studies, this section introduces independent variables, dependent variables and control variables of the executive pay gap within the team and performance.ChapterⅣ, empirical testing. This part conducted an empirical analysis on the factors that impact executive pay gap within the team based on the theoretical analysis. The author used a panel data of service sector companies listed on the Shanghai Stock Exchange during 2005 to 2009 and fixed effects panel econometric model to analyze the pay gap within executives team and company performance. The results showed that tournament theory is more suitable to explain the correlation between pay gap within listed companies executives team and company performance in China services industry.ChapterⅤ, conclusions and recommendations. This chapter summarizes the empirical results, and makes some constructive suggestions based on conclusions. Finally, we discuss the limitations and weaknesses of this study and present the direction and fields for future research.Through the above study, we draw the following significant conclusions:first, the corporate performance of the service sector listed companies and pay gap within top management team are significantly correlated at 1% level, indicating that executives pay gap within the team in the service sector enterprises is good for performance improvement; second, performance of listed service companies and the company's diversification are significantly negative correlated at 5% significance level, which shows that our listed service enterprises'diversification strategies generally failed and can not achieve the desired goals; third, performance of the service company and technical complexity, at 5% and 10% level, are significantly correlated, which provides a theoretical basis for us to develop high-end services and obtain high residual value.