Research On The Effect Of The Government Intervention And The Pay Gap Between Executives And Employees On Corporate Performance

Salary is the key element for motivating and constraining the staff,and the pay gap within the enterprise maybe affect the enthusiasm and initiative of employees,thereby affect the performance level of the enterprise.Scholars have studied the effect of the pay and the pay gap on corporate performance,and obtained enlightening conclusions.However,few scholars consider the regulating role of government intervention on the relationship between the pay gap and corporate performance.By using 2010-2014 five-year hybrid data of 1485 manufacturing companies which listed in Shanghai and Shenzhen Stock Exchange,we discuss the impact of pay gap on enterprise performance with Stata and OLS multiple regression analysis method,and at the same time we consider the effect of the government intervention.In examining the effect of the pay gap,we use two variables,which are absolute pay gap and relative pay gap;and we measure the corporate performance by two variables too,which are total return on assets(ROA)and Tobin's Q.We find that without considering government intervention,absolute and relative pay gap have a significant positive impact on corporate performance,that is,the greater the pay gap,the better the company performance,the smaller the pay gap,the worse the enterprise performance.When measure the government intervention by the nature of the enterprise,we find that the government's intervention has a significant positive regulating impact on the relationship between the pay gap and corporate performance,that is,when government intervention is higher,the greater the pay gap,the better the corporate performance,the smaller the pay gap,the worse the corporate performance,and vice versa.To test the robustness of the empirical result,we use the ratio of government ownership as the substitution variable of the nature of the enterprise,and find the research conclusion is robust.The revelation of the study for theoretical circle is that,when study the impact of the pay gap,they should consider the environment within and outside the enterprise,and the heterogeneity of the enterprise to get conclusions which have theoretic values;The revelation of the study for relevant policies makers is that,when make compensation policies,they should fully respect the market rule so that the pay gap play championship effect;The Enlightenment for practitioners is that,the company should establish reasonable compensation system and attach importance to the incentives of the pay gap for employees.