Study On Pay Dispersion Stickiness

Designing a favourable compensation incentive contract is one of the important ways to solve agency problem. With the reform of compensation mechanism, the compensation of listed companies in China has gradually linked to company performance restraining and stimulating staffs to a certain extent. But this process also highlights many problems; in the first place, the pay dispersion between executives of listed companies and ordinary workers has increases gradually which leads “whopping price” executive compensation the focus of the whole society.According to data from the Hay Group, this phenomenon is most serious in China. Executive compensation is 12.7 times of lower-level employees which causes the attention of the society from all walks of life.China promulgated “pay curbs” in 2009, stated that executives in state-owned enterprises shall not exceed 20 times of staffs’ average wage in an annual salary. After the financial crisis during the year of 2008, performances of listed companies in China dropped off widely, on the contrary, executive compensation demonstrated “whopping price” instead of dropping. Based on this, this paper further studies the deep-seated problems, specifically, whether the pay dispersion increases with the rise in the company’s performance? When the performance of the company increased, whether the rate of increase of the pay dispersion consistent with the rate of decrease of the pay dispersion when the performance of the company decreased,?Based on related theories and literatures at home and abroad, using the methods of theoretical analysis and empirical research, using the data of A shares from stock markets of Shanghai and Shenzhen during 2009—2013 as samples, this paper empirically tests whether the pay dispersion exists performance sensitivity, the existence of the sticky character of the pay dispersion and the influence of nature of property right to the above problem.There are four chapters in this paper. Chapter 1 is introduction. Chapter 2 introduces theoretical analysis and research hypothesis. This chapter mainly introduces the principal-agent theory, the optimal contract theory, two-factor theory, the right management theory,and the manager market theory, the three hypothesis is presented according to the corresponding theoretical analysis; Chapter 3 is the research design, including sample selection, variable design and model building; Chapter 4 is the empirical test and the result analysis, including descriptive statistics, correlation analysis between the main variables, multiple regression analysis and robustness test; Last part is the conclusion and suggestion, the conclusion from this study were analyzed, and gives the corresponding policy recommendations, and pointed out the shortcomings of this study and the paper points out the future research direction.The main conclusions of this article are: the pay dispersion do exists performance sensitivity, the better the enterprise performance, the greater the pay dispersion; The pay dispersion performance sensitivity showed asymmetry. Compared with the circumstance of company performance dropping, the pay dispersion performance sensitivity is higher during the period of company performance promoting. That’s to say, pay dispersion in China appears sticky. Compared with the circumstance of company performance dropping, the growth of executive compensation during the period of company performance promoting exceeds the decrease of executive compensation. Nature of property right affects the stickiness of pay dispersion which is much more obvious in state-owned enterprises. Afterward, this paper puts forward corresponding suggestions according to the research conclusion and future research direction.