The Impact Of Pay Gap Within The Executive Team On The Stock Price Crash

The Chinese stock market is characterized by immaturity and instability,mainly manifested in the frequent occurrence of stock market slumps,and even more frequent slumps or surges without warning.In 2017,the Central Economic Work Conference focused on the prevention and control of financial risks,which made the risk of stock price collapse become the focus of academic research.In the process of corporate governance,executives either reduce their holdings for high prices or maintain excessive consumption,which will prompt them to hide bad news and eventually lead to a stock price crash.Executives’ perception of internal compensation gaps will affect their behaviors in the company’s follow-up management,such as earnings manipulation or negative information processing,which in turn brings the company’s stock price crash risk.As for the impact of the salary gap within the executive team on the enterprise,most studies focus on innovation investment,risk taking,enterprise performance,etc.,and few studies extend the logic chain to the capital market.However,investors are most concerned about the volatility of the stock market and their own investment efficiency.Therefore,it is necessary to directly explore the impact of the salary gap within the executive team on the risk of stock price crash.Based on this,on the basis of collecting and sorting out relevant literature at home and abroad,the data of my country’s A-share listed companies from 2015 to 2020 are used as regression data and samples to analyze the effect of the internal compensation gap of the executive team on the stock price crash risk of listed companies.Theoretical analysis and empirical test are carried out.At the same time,this paper also selects the nature of property rights and internal control as moderating variables to explore their moderating effects on the relationship between the internal compensation gap and stock price crash risk of the executive team.Research indicates:(1)The salary gap within the executive team can significantly restrain the company’s stock price crash risk.That is,widening the pay gap within the executive team can significantly inhibit the possibility of future collapse of the company.(2)The nature of private enterprises can strengthen the inhibitory effect of the salary gap within the executive team on the stock price crash.Compared with state-owned enterprises,the executive compensation gap of private enterprises has a more obvious inhibitory effect on the risk of stock price collapse.(3)Good internal control can enhance the inhibitory effect of the salary gap within the senior management team on the stock price crash risk of listed companies.High-quality internal control itself can also restrain the risk of stock price collapse.Good internal control quality and the salary gap within the senior management team can reflect a complementary effect,and jointly play a role in restraining stock price collapse.Finally,according to the above empirical results of this paper,the following policy suggestions are put forward:(1)Expansion of the internal salary gap of the senior management team.The vertical salary gap between different levels should be widened,especially the salary gap between CEOs,chairman of the board and other executives,so as to give play to the positive incentive effect of tournament theory.(2)Improve the disclosure of salary information.Listed companies make detailed disclosure of salary data,salary decision-making basis,etc.The management department regularly scores the salary information disclosure of senior executives of listed companies,and takes corresponding reward and punishment measures according to the score results.(3)Improve the company’s internal control level and quality.Enterprises should continuously improve their own internal control mechanism,and use good internal control to improve the quality of financial information disclosed to the outside world,and to effectively supervise and restrain the opportunistic and self-interested behavior of management,so as to reduce the risk of corporate stock price crash.