Executive Pay Dispersion On The Company Performance's Impact-An Empirical Study Of Listed Companies In China

Executive compensation has been subjected to intensive theoretical and empirical investigation for a long time.The world financial crisis made this issue get much attention. From a fair point of view, this paper studies how does internal executive pay dispersion and external pay gap impact on the company's future performance? What are the characteristics of this relationship? According to this idea, this paper selects the 2006-2008 data of listed companies in Shanghai and Shenzhen Stock exchange and does empirical study in two aspects.Firstly, we test the relationship between internal executive pay dispersion and future performance, as well as the correlation under the moderator variables, such as enterprises'size and state. Coefficient of variation of executive pay as indicator is the major innovation in this part.This indicator is the best indicator to measure fairness, which foreign scholars believe and use widely.while there are no domestic scholars using this indicator. We draw Conclusions as follows:First, In line with the behavioral theory, internal executive pay dispersion has an unfair negative effect on company's future performance. Second, this non-negative correlation in the non-state-owned enterprises will become a positive correlation in favor of tournament theory. Third, in the large-scale enterprises, this negative correlation between internal executive pay dispersion and performance will be weakened, but still support the behavioral theory. Drawing on other scholars'thinking for the internal equity, the second part of the empirical studies first tests the relationship between external pay gap and the future performance. We select six industries as the objects of our study, and find that external unfairness also has a negative impact on future performance, in support of behavior theory, in line with the original hypothesis. The results indicate that enterprises should not only pay attention to internal fair salary structure, but also should focus on the external industry fairness, otherwise this will cause bad effects on the performance of enterprises.Thus external equity and internal equity are equally important.