| The incentive compensation of top management has always been concerned by both practitioners and academic circles since the 80's of last century, and there has formed many literature and theories about this subject. But the existing studies seldom focused on the pay gap within the top management team. Because of without considering the specific application environment in studies, there is no unified theory about the relation between pay gap'and company performance. Instead of it. there has two theories based on opposite views——tournament theory and behavioral theory. Considered the background of China and based on the result of studied the top management's pay gap factors, this paper analyses the pay gap"s effect on performance in different risk environment from dynamic and static angles, in order to gets the applicable existing conditions about tournament theory and behavioral theory.Firstly, this paper studies the factors of top management's top gap. The results show that number of the top management, CEO seated as board chair, number of board, ownership concentration and total assets of company have positive relation with the pay gap, and company property, the ratio of independent directors and risk have negative relation with the pay gap. After this, the paper analyses the pay gap's effect on performance in different conditions, and find that when there is high risk or risk increasing environment around company, decreasing the pay gap will bring a better company performance, supporting the behavioral theory, and when there is low risk or risk decreasing environment around company, increasing the pay gap will bring better company performance, supporting tournament theory.The innovations of this paper is that study the pay gap's effect on company performance in the different risk management environments, and find that the pay gap has varying impact on performance in different environments, and gets the applicable existing conditions about for both tournament theory and behavioral theory to China's listed companies. Therefore, this paper provides listed companies with a theoretical and empirical basis to designing the pay gap dynamically under specific environment. |
