Empirical Study On Internal Pay Gap And Enterprise Performance

The internal pay gap had raised academic attention since the1980s, and now has become the hot issue in the theoretical and practical field after decades of development. During the financial crisis period in2008, though many enterprise performance affected by the economic crisis, executive compensation levels showed no decline, even increasing. This phenomenon had aroused public concern. After the reform and opening up, Chinese economic system converted from Planned Economy to Market Economy, and there is no more over-share. So that under the current market economy system, it is reasonable and necessary that pay gap appears within the enterprise. However, if the operator is allowed internal pay gap increases, excessive pay gap will directly affect the performance of the enterprise. The internal pay gap includes the ones between different executives and the ones between executives and employees, and a number of researches show that pay differentials within the enterprise to a certain extent affect business performance. Meanwhile, as the role of private economy in the national economy is growing that the rise of private listed enterprises has aroused the concern of domestic scholars. In this paper, linking the two extreme issues together, analyze how the pay gap within private listed companies interacts with enterprise performance by using the empirical data, and further testing the influence factors of relative pay gap between executives-employees.This paper mainly discusses the private listed companies within the internal pay gap and enterprise performance relationship. Research is divided into four parts:the first part is the introduction, respectively expounds this article research background and research significance, the domestic and foreign literature review, research ideas and methods, main contents and possible innovation place; The second part is the theoretical basis and theoretical analysis of the pay gap and enterprise performance, as well as an analysis of the present situation about our country current executive pay gap within the team and the pay gap between executives-employees, put forward the theory basis for later hypothesis; The third part is the empirical test; The fourth part is the research conclusions and countermeasures and suggestions.The paper begins with the literature review of domestic and foreign research on Tournament Theory and Behavior Theory, summarizing the research methods and problems, combined with the characteristics of China’s private listed companies to come to the preliminary research hypotheses. In the empirical research, the study sample is selected from2009-2011Shenzhen and Shanghai A-share listed private companies. In order to make findings rigorous and typical, the pay gap chooses two Metrics, one is the pay gap within the executive team and the other is the pay gap between executive and employees. By using the descriptive statistical analysis, correlation analysis, linear regression analysis and stability test to analyses the sample data; there are four major conclusions in this paper: First, the pay gap within the team of executives of listed private companies and enterprise performance is significantly correlated. Second, the pay gap between executive and employees and enterprise performance shows an inverted U-shaped relationship, that is, when the pay gap increases, the corporate performance first increased and then decreased, and there is a inflection points between the pay gap and corporate performance and are linearly related. Third, the enterprise scale and the relative pay gap between executives-employees are related. Fourth, the ownership concentration is negatively related to the relative pay gap between executives-employees. In the end of the paper, there are suggestions to perfect salary system design, which is based on the defects in compensation management according to Chinese private listed companies.