Study The Influence Of Internal Pay Gap On Corporate Performance

In recent years, the issue of top management team’s pay of listed firms hasgradually become the focus of theorists and empiricists, however, existing researchesalways focus on the effects of the quantity of top management team’s pay on firmperformance rather than the structure of top management team’s pay. But salarystructure on firm performance may be more important than the salary itself. Thisdissertation attempts to research its impact on firm performance from one aspect ofthe structure of top management pay—the pay gap. Secondly, the pay gap not onlyaffects the performance of top management team, it will affect ordinary employees’sense of fairness and performance too. This dissertation will also explore the impactof the pay gap between top management team and ordinary employees on the firm’sperformance. Furthermore, existing research rarely involved in the specificapplication environment of the pay gap, therefore this dissertation will join twoenvironment variables of the proportion of state-owned shares and firm growth,testing them how to adjust the effect of the pay gap on firm performance.This dissertation selects the remuneration and performance data of listed firmsfrom2006to2010, using the method of theoretical analysis and empirical research,and divides pay gap into the pay gap within the top management team and the pay gapbetween top management team and ordinary employees. Then we will analyze theirrespective influence on firm performance, this is to say both the pay gap will improvefirm performance or reduce firm performance, thereby test what kind of pay gaptheory is more applicable in China. On this basis, this dissertation will research theproportion of state-owned shares and firm growth how to adjust the pay gap on firmperformance, and thus the different firms pay incentives.The empirical results show that:(1) Pay gap of the top management team andpay gap between the top management team and ordinary employees both playsimulative role for the firm’s performance, and in recent years the tournament theory has become the impactful theory to explain the impact of internal pay gap of China’slisted companies on firm performance.(2) The proportion of state-owned shares willweaken the positive effect that the firm’s internal pay gap on firm performance.(3)Better firm growth will enhance the positive impact that the firm’s internal pay gap onfirm performance.(4) Compared to underdeveloped areas in central and westernregions, the firm’s internal pay gap in developed eastern region has a greater impacton firm performance, and the adjustment effects from proportion of state-ownedshares and firm growth also have the same impact on both sides.