Executive Compensation Gap, Agency Cost And Company Performance-Evidence From Chinese Listed High-tech Companies

According to the principal-agent theory, the enterprise owners must implementeffective incentive to make the agents’ behavior consistent with the interests of theowners, thereby, saving agency cost and improving company performance. And thesalary is one of the most important content of modern enterprise incentive, but atpresent the research on relationship between compensation and company performance,mainly concentrated in the relationship of absolute executive compensation andcompany performance, the study about compensation gap is relatively rare. With the eraof knowledge and information economy, the high-tech industries, such as electronics,medicine, biology and information technology have become the important force topromote the growth of economy. But the research about compensation gap of high-techenterprises is relatively rare, currently, in the national strategy of economictransformation, the research about the executive compensation gap of high-techenterprise is very meaningful.In this thesis, we study the executive compensation gap of listed high-techcompanies in China to discuss the applicability of tournament theory and behaviortheory in the listed high-tech companies in China. Our research results shows:①Theexecutive compensation gap and the agency cost of Chinese listed high-tech enterpriseare negatively correlated.②The executive compensation gap and companyperformance of Chinese listed high-tech enterprise are positively correlated, thetournament theory is verified in listed high-tech enterprises in our country.③Theexecutive compensation gap of Chinese listed high-tech companies is now at a low level,companies can increase the executive compensation gap appropriately to save theagency costs and improve company performance.④The correlation between long-termexecutive compensation gap and agency cost is not so significant as annual executivecompensation gap, The correlation between long-term executive compensation gap andcompany performance is not so significant as annual executive compensation gap either.