The Impact Of Executive And Employee Compensation Gaps On The Level Of Corporate Risk-Taking

China adheres to the principle of distribution according to work,improves the distribution mechanism according to factors,and promotes more reasonable and orderly income distribution to narrow the compensation gap.With the economic development,the salary of the company’s executives continues to rise,and the compensation gap between senior executives and employees continues to widen,which not only reflects the social problem of social income distribution,but also relates to whether the company can reasonably avoid the problem of entrustment and agency to achieve the goal of maximizing the company’s interests.Therefore,a reasonable compensation system and a reasonable compensation gap can not only fully mobilize the work enthusiasm of senior executives and employees,with clear rewards and punishments,but also help to reform and build a differentiated compensation distribution system linked to company’s performance responsibilities.The compensation gap is related to the vital interests of executives and employees,and also directly affects the psychological perception of executives and employees on risk appetite,which in turn affects the company’s behavior decisions and performance.The company’s risk-taking level mainly refers to the selection of high-risk projects with uncertain expected income inflow and long-term value in investment and operation.A high level of risk-taking can not only help the company increase shareholder wealth and achieve the company’s long-term development goals,but also contribute to the high-quality development of the economy.Due to the existence of the principal-agent relationship,executives may have a tendency to avoid risks,reduce high-risk but positive net present value projects,and reduce the level of risk exposure.The rationality of the compensation system directly affects the degree of effort and initiative of executives,so as to affect the company’s business behavior and decision-making.At present,there is little literature to analyze the impact of this compensation gap on risk-taking attitudes and risk-taking levels.Therefore,this paper explores the effect relationship between the compensation gap and the level of corporate risk-taking,which is helpful to explain the economic and economic consequences of the compensation gap of executives from the perspective of behavioral theory,and enrich the development of literature research on compensation gap and risk-taking level.This paper reviews and summarizes the literature in the field of compensation gap and risk-taking level at home and abroad.Based on principal-agent theory,behavior theory and prospect theory,this paper explains the economic effect of executive compensation gap on risk-taking level.In the empirical part,this paper uses A-share listed companies from 2007 to 2021 as a research sample to explore the relationship between executive compensation gap and risk-taking level,and the results of OLS basic regression and instrumental variable method show that there is a negative correlation between executive employee compensation gap and risktaking level.This negative correlation is mainly pronounced in state-controlled enterprises and companies with female board members;Furthermore,an effective governance mechanism can moderate the negative impact between the executive compensation gap and the level of risk exposure,which affects the company’s risk exposure level through agency costs.The research innovation points of this paper are: First,the research perspective is different.The domestic and foreign compensation gap research mainly focuses on the compensation gap between executives,and the economic consequences of the compensation gap also focus on the field of corporate performance and innovation.Second,multi-perspective research design.To explore whether effective governance mechanisms have moderating effects on executive-employee compensation gaps and corporate risk-taking.At present,no scholars have studied the mediating effect of agency cost on it,so agency cost is selected as the mediating variable to explore and supplement the research on the mediation mechanism of the compensation gap between executives and employees and the level of risk taking.Third,based on the perspective of economics,the interpretation of the economic effect of compensation gap by behavioral economic theory is included.Important theories in behavioral economics include behavioral theory and prospect theory to explain the irrational behavior of executives and employees in the company’s business activities,which in turn helps explain the negative effect of executiveemployee and company risk-taking level,and expands the application of behavioral economics in the field of compensation gap and risk decision-making.