An Empirical Research On The Influence Of Compensation Gap Of Intra-listed Companies In China On The Company Performance

It is an important issue about internal compensation gap effect on compensationsystem design and management. Existing studies mostly investigate the relationshipbetween the level of executive compensation and company performance, but do lessresearch on internal compensation gap influence on the company’s future performance.So the research for the specific application environment of the compensation gap andthe relationship of corporate performance and the compensation gap can not onlypromote the development of the Chinese enterprises compensation in theory, but alsocan guide enterprises compensation decision-making scientifically, and it has importanttheoretical and practical significance.First of all, I combed marginal productivity theory, tournament theory and behaviortheory. Then comprehensive analysis of the reasons why the last two theory drawopposite conclusions. It offers theoretical support and guidance for this paper.Secondly, taking into account the lag effect of the compensation gap, I selects thedata of from listed companies in Shanghai and Shenzhen Stock Exchange from2007to2009and other financial data a year behind for the sample in this paper. The research ofcompensation gap influence on performance is conducted from two sides--thecompensation gap of executive team internal and the compensation gap betweenexecutive team and staff by using multiple regression, grouped regression andhierarchical regression.Empirical results show that, it is showing a significant positive correlation aboutabsolute compensation gap of executive team internal and the compensation gapbetween executive team and staff influence on the company’s future performance. Thereis almost no significant impact on relative compensation gap between executive teamand staff. It is generally consistent with tournament theory expectations.The compensation gap of executive team internal has no significant effect onperformance, otherwise the absolute compensation gap between the executive team andstaff influence on performance when the type of ultimately control is state-owned. Butthe effects are significantly weaker than the type of ultimate control is non-state-ownedcompanies. The more cooperation is needed in companies, the weaker performanceincentives by internal compensation gap.Finally, we discuss the conclusions and limitations of this paper, and put forwardpolicy recommendations about it.