Research On The Influence Of The Marketization Process And Pay Gap Within The Listed Company On Firm Performance

Internal pay gap is an important part of the compensation contract, while the compensation contract design is an essential part of internal regulations and corporate governance in enterprise, which have a key impact on the output and efficiency of the Corporation. As a key part of socialist income distribution reform, the state-owned listing Corporation pay gap especially have much to do with the fairness and justice. Thus the pay gap is always a hot issue in academic research. However, previous studies only focused on the influencing factors of compensation gap and its consequences, paying little attention to the institutional background in china.In recent years, China’s market-oriented reform have achieved highlight results. however, because China’s market reform is step by step, the degree of marketization in various regions is different. As an important institutional background, marketization process will produce important influence on pay contract arrangement of the state-owned listing Corporation. Therefore, this paper will introduce the process of the marketization in the research, from the dynamic point of view, combined with China’s market-oriented reform of the special system background, to explore the state-owned listing Corporation pay gap design, expecting to offer some reference to the design of the pay contract for the state-owned listing Corporation.There are two traditional competing theory explaining the incentive effect of salary gap, namely the tournament theory and behavior theory. Tournament theory advocates expanding the pay gap, who hold that the pay gap can improve the performance of the company. But behavior theory insist narrowing the pay gap, who sustain the pay gap will bring negative influence to employees, and do harm to employees’ cooperation, reducing the output of the organization. Both the tournament theory and behavioral theory are one-sided, which only see good side or bad side of the pay gap, without fully understanding the problem of compensation gap. This paper uses the transaction cost theory and incentive theory to explain the problem of compensation gap of the company. This article advocates understanding problems with contingency view, and we must recognize the incentive effect of pay gap and guard against the risk brought by the salary gap. On the basis of theoretical analysis, this paper improved the model of traditional salary gap incentive effects, the cross term of the process of marketization and the pay gap is introduced into the model, not only using the newer data to further validate the state-owned listing Corporation salary gap on the performance of the company’s influence, but also to verify the influence marketization on the incentive effect of salary gap. Through theoretical and empirical research, this paper found that:(1) Marketization has positive influence on the performance of the company;(2) On average, the bigger the pay gap, the better performance of the present state-owned listing Corporation;(3) The interaction of compensation gap and marketization process has a negative regulatory role in the performance of the state-owned listing Corporation Ltd. Namely, along with the marketization advancement, salary gap on the performance of the company’s contribution is reducing, so do the incentive effect of the pay gap. Based on the research result, this paper puts forward the following suggestions for the SASAC:(1) To promote the marketization process, exert the market forces;(2) To improve the compensation disclosure system of our country’s state-owned listing Corporation, promote the pay disclosure of state-owned listing Corporation transparency;(3) Regulation to the state-owned listing Corporation ought to be different according to various region:for the company in low degree of marketization area, the SASAC in regulation should reduce intervention, releasing more power to the board of directors and the compensation committee, to promote market-oriented compensation; for the company in high degree of marketization area, the SASAC should focus on monitoring, because the large compensation gap should be restricted. In addition, the article also proposes the following suggestions for the compensation committee of the corporation:pay commission to make reasonable pay gap arrangements:for the company in the low degree of marketization area, the compensation committee should expand the pay gap in the compensation contract; for the company in the high degree of marketization area, the compensation committee should pay attention to reduce the salary gap in the formulation of the salary structure, extending to other incentives. This paper consists of six chapters, the main contents of each chapter are as follows:Chapter1ExordiumAs the beginning of the paper, this chapter is the foundation of the thesis, mainly introducing the significance of the research,the design and structure of this paper, the suitable method as well. Firstly, this chapter expounds the research background and significance, and then expatiates on the research design and framework, at last the research method of this paper. This study not only extends the research perspective of compensation gap problem, improving the related model, but also has important practical significance for China’s market reform and compensation contract.Chapter2Research StatusThis paper have not searched the same literature about the topic. Therefore the study of the status about the problem are reviewed. Firstly, the chapter reviews the research literatures on the relationship between marketization process and the company performance; secondly, the chapter summarizes the research on the incentive effects of the pay gap:foreign scholars hold mainly two kinds of viewpoints on the problem, one is that the pay gap within the company have a positive influence on the performance of the company and company have a positive impact on the performance of the company, but the other insists that the pay gap within the company have a negative influence on the performance of the company. These two viewpoints based on the tournament theory and behavior theory respectively. In addition, there is a view that the influence pay gap on the performance of the company is not totally positive or negative, looking at this problem using contingency view, but the contingency view is more of an empirical validation, lack the support of authority theory. At last the process of marketization, remuneration gap and the performance of the company are reviewed. Based on the summary of relevant studies, the author gives the comment.Chapter3Theory AnalysisThis chapter defines the basic concepts firstly. The marketization process in this paper refers to the process of region marketization, measured by the area marketization index. Notably, research of the pay gap within the company usually includes the pay gap between executive management team and the compensation gap between executives and staff, in order to narrow the scope of the study, making the research more deeply, the salary gap is defined as salary gap between the executives and ordinary employees. In addition, this chapter also defines the executive, the performance of the company and other concepts.Secondly, the chapter introduces the theoretical basis of the article. Apart from the traditional tournament theory, the paper also uses the incentive theory and transaction cost theory to explain the salary gap. They provides the theoretical basis for the impact process of the marketization on incentive effects of the pay gap. This part is designed to introduce and review the basic theory.Finally, theoretical analysis was carried on based on the theoretical basis of the research. The part of the analysis is to analyze the following topics in the research combined with theoretical basis, and the special institutional background in China:(1) using the transaction cost theory to the analyze the influence the process of marketization on the performance of the company;(2) combined with the institutional background, the part analyzes whether the tournament theory is also suitable for the present stage of our country state-owned listing Corporation;(3) analyzing the influence the interaction of marketization and the pay gap on the performance of the company with the transaction cost theory and the theory of motivation.Chapter4Hypothesis, Variables, Models and DataThis chapter firstly put forward three hypothesis according to three questions "the impact marketization on the performance of the company"" the impact pay gap within the company on the performance of the company""the influence the interaction of marketization and the pay gap on the performance of the company". Then the chapter lists the related variables, including the explanatory variables, the dependent variables and control variables. On the basis of previous research, the paper then establishes three models on the basis of previous research, respectively used to explore the influence the process of marketization, the salary gap and their interaction on the company performance; finally, the data sources are given.Chapter5Empirical Results AnalysisAccording to the collected data, this chapter firstly give the descriptive statistical analysis, to understand the characteristics of data. Secondly, the correlation analysis, shows the correlation coefficient between variables. Then the chapter carries on multiple regression and regression analysis. In addition, also the endogenous test, to enhance the robustness of the empirical results.Chapter6Research Conclusions And SuggestionsThis chapter includes two parts:firstly, according to the theoretical analysis and empirical study, this part summarizes the conclusions of this study:(1) Marketization has positive influence on the performance of the company;(2) On average, the bigger the pay gap, the better performance of the present state-owned listing Corporation;(3) The interaction of compensation gap and marketization process has a negative regulatory role in the performance of the state-owned listing Corporation Ltd. Namely, along with the market advancement, salary gap on the performance of the company’s contribution is reducing, so do the incentive effect of the pay gap. Secondly, according to the three conclusion, the author gives the suggestions,which include the policy suggestions for the government and the Countermeasures for the company.The main contributions of this paper are:(1) Research perspective is relatively innovative. Scholars at home and abroad focus their research on the incentive effect of the pay gap and factors that influence the salary gap. In this paper, while the incentive effect of the pay gap is also the topic, but Chinese special system background is brought into the research, having certain innovation to research compensation issues from the perspective of the marketization process. It is hoped that the paper can give some reference to the design of compensation contract and the marketization of the enterprise.(2) Research methods are improved. On one hand, this article explain the issue of pay gap from the transaction theory and incentive theory, out of the past theoretical analysis only focusing on the tournament theory and behavior theory. Using economics theory to explain the compensation contract problems, not only improving the readability of the article, but also providing a new way of theoretical research. On the other hand, in the empirical research, the process of marketization and the pay gap cross terms are brought into the model, improving the model. Also by designing the model that explain the influence of marketization process on the performance, the paper achieves certain degree of innovation in research methods.