Top Management Team's Pay Gap,Pay Level And Inefficient Investment

In recent years,the relationship between enterprise performance and management incentive has attracted extensive attention of scholars throught the world.Around these issues,scholars have launched lots of studies,and achieved fruitful results.However,scholars do not have a consistent conclusion about the study of investment behavior,which is the intermediate variable between executive incentive and firm performance.Top management team is the main policy maker of company resource allocation,and compensation contract,as a governance mechanism to guide management to make decisions,should be beneficial to the development of enterprise.However,it is subject to the conflict between principal and agent in the separation of the two rights in modern company,managers could take the inefficient investments,which meet the individual interests but damage the value of the company.China's listed companies generally have inefficient investment behavior,therefore,this paper tries to study how the management compensation incentive design affects the inefficient investment behavior of enterprises from different perspective,so it has both theoretical and practical value.In view of this,the paper is based on the situation which the phenomenon of inefficient investment behavior in Chinese Listed Companies,under the background of China's listed companies mandatory disclosure of executive compensation,it tries to take the inefficient investment as a breakthrough point.In this paper,the financial data of listed companies in the past four years are taken as the research samples.Through the combination of normative research and empirical research,this paper attempts to explore the following issues:whether the compensation gap of top management team has effect on inefficient investment?If this effect exists,is this effect linear or nonlinear?At the same time,we have a deeper analysis of this relationship.Does the salary incentive level of executive team in the same industry affect the relationship between the salary gap within the team and the inefficient investment?And how does it affect the relationship between them?This paper is divided into six parts:the first is the introduction,this chapter briefly introduces the background and significance,and then describes the research contents and methods,and further expounds the research ideas and planning,and finally puts forward the possible innovation.The second is literature review,which combs the research results of pay gap and inefficient investment,and puts forward the research point of view.The third is theoretical basis and assumptions.This part firstly defines the related terminology,and then based on the principal-agent and information asymmetry,combined with the tournament theory and behavior theory,and then analyzes the influence of executive pay gap on managers' investment decision,discusses the moderating effect of compensation level on it,fnally puts forward four hypotheses.The fourth is the empirical research design.This part explains the source of data,constructs relevant empirical model,and explains the definition of each variable in detail.The fifth is the empirical results and analysis.Firstly distinguish the underinvestment and overinvestment of different samples,then carry out multiple linear regression analysis,Then the salary level is used to test the moderating effect of the salary gap of the top management team on the inefficient investment.Finally,a series of robustness tests are conducted.The sixth is research conclusions and policy recommendations.First summarizes the previous conclusions,and then puts forward relevant policy recommendations.Then it points out the inadequacies of this study,and looks forward to the next research directions.This paper finds that there is a "U" relationship between top management team's pay gap and infficient investment,indicating that there is a point of inflection.The pay gap could inhibit the infficient investment to some extent,but more than the inflection point,it will promote inefficient investment behavior.At the same time,with the increase of top management team's pay level,the influence of pay gap on infficient investment will be weakened.The conclusion can enrich the research of executive compensation incentive and inefficient investment from the theoretical level,and can providing a reference learn for the reform of the listed companies in China to avoid inefficient investment.