The Research On The Effect Of The Compensation Gap Between Senior Management And Staff On Firm Performance And Productivity In Chinese State-owned Enterprises

Recently senior managements’ sky-high compensation of state—owned enterprises has aroused wide concern in society, and the relationship between compensation dispersion and firm performance is one of the hot discussion topics of the academic. Based on two main theories about compensation dispersion-tournament theory and behavioral theory, we do the empirical research to find out how compensation dispersion has an impact on firm performance in state-owned enterprises and does enterprise productivity cause this effect?This thesis selects state-owned listed companies from 2011-2013 as samples. Firstly, we use descriptive statistical analysis to find the features of compensation dispersion between the senior management team and staff in Chinese state-owned enterprises. Furthermore, we study the relationship between compensation dispersion and firm performance and find out whether enterprise productivity leads to this relationship. In addition, we divide state-owned enterprises into several kinds according to market competition degree and ultimate ownership and compare the relationship between compensation dispersion and firm productivity or performance in different kinds of state-owned enterprises.We have found that there is a negative correlation between compensation dispersion and firm productivity in state-owned enterprises and this correlation is not affected by market competition degree and ultimate ownership; The relationship between compensation dispersion and firm performance is inverse U-shaped relationship, which means firm performance will firstly increase and then decrease as the expansion of compensation dispersion between the senior management team and staff. In competitive market and local government-led listed company, there is a significantly correlation between compensation dispersion and firm performance. It is also inverse U-shaped relationship; In monopoly market and central government-led listed company, the relationship between them becomes positive linear relationship. We have found that the relationship between compensation dispersion and firm performance and between compensation dispersion and firm productivity is not the same. The reason maybe that firm productivity is not the only way that has an effect on the relationship between compensation dispersion and firm performance.