Research On The Relationship Between Executive Pay Gap And Inefficient Investment

At present,in the financial management activities of listed companies in China,investment activities serve as the basis for supporting the company's production and operation,affecting the stability of the company's profitability and cash flow growth,thus affecting the growth of the company.It is the starting point for the company to make any decisions.It plays a fundamental role in the development of the company.However,the inconsistency between management and shareholders due to the separation of management rights and ownership makes the company's investment activities deviate from the level that maximizes the value of the company,it results in low investment efficiency and produce the problem called "inefficient investment",which consist of"over investment" and "under investment".It damages the company's value and severely limits the development of the company.In recent years,although scholars have conducted a lot of research on the relationship between management incentives and corporate performance based on principal-agent theory,however,investment behavior as an intermediate factor affects the relationship between management incentives and corporate performance.Now scholars have relatively little research on their relationship with management incentives,and the conclusions are not consensus.Therefore,from the perspective of intermediate factors inefficient investment,we can explore the path of management incentives affecting corporate performance,and test whether the path is effective,so the research has certain practical significance.At the same time,the existing studies on management incentives mostly confined to executive compensation levels and equity incentives,there are few studies on executive compensation structures involving compensation gaps.Therefore,based on the above background,this paper examines the relationship between executive pay gaps and inefficient investment.What impact does the pay gap between different levels of senior management have on inefficient investments?Will the differences in the establishment of salaries and personnel appointments among state-owned and non-state listed companies affect the relationship between executive pay gaps and inefficient investments?The article studies on this.This article takes the A-share listed companies of Shanghai and Shenzhen Stock Exchanges from year 2010 to 2016 as the research sample,and through theoretical research and empirical research methods,tests the executive compensation gap(including internal pay gap and external pay gap)on inefficient investment of enterprises,and explored the impact of property rights on the relationship between two.The research findings in this paper are:(1)The differences in internal pay gaps and external pay gaps among executives can curb corporate inefficient investment behaviors(including overinvestment and underinvestment).(2)When taking the nature of property into account,although the executive-level salary gap in state-owned enterprises can also incentivize management to avoid inefficient investment,due to the appointing mechanism of state-owned senior management personnel and the inherent limitations in remuneration formulation,this suppression effect will be significantly weakened compared to that of non-state-owned enterprises.This paper divides the executive pay gap into internal and external pay gaps,discuss the relationship between the company's inefficient investment and the executive pay gap,and discuss the impact of the different nature of the company's property rights on the relationship between two.The article conclusion can not only enrich the theory of the research on the executive compensation and inefficient investment of the sector,it can also provide some reference for setting up the salary structure and avoiding inefficient investment of listed companies in China.