The Effects Of Executive Pay Gap In China’s Listed Real Estate Enterprises On Enterprise Value

According to the principal-agent theory,the disagreement of targets and interest between the principal and agent is caused by the separation of corporate ownership and the power of management. Therefore,the client must pay a certain cost to the manage agent and this part of the cost is regarded as the incentive for the managers. How to pay this part of the cost can be the best motivators for the operators and can improve the performance of enterprises is one of the most concerned issues of the modern enterprise. At present,the research on executive compensation and corporate value is relatively large while the study of executive pay gap impact on enterprise value is relatively less. The real estate industry of China has been developing rapidly in the past ten years and the executive compensation is relatively large among all kinds of industry. In face of such a high salary and pay gap,whether the value of the enterprise can obtain the corresponding growth? Therefore,there is practical significance to the research of executive pay gap from China’s real estate industry in the period of rapid growth.This paper makes researches on the real estate enterprises in China during the year of 2006 to 2012 and test the hypotheses by descriptive analysis、correlation analysis、variance analysis and regression analysis method and so on. This dissertation choice this year and next year’s enterprise value as the explained variable and select the salary gap、external salary gap and external compensation gap symbol as explanatory variables. The growth rate of total assets、ownership concentration、the proportion of state-owned shares、per share of free cash flow 、equity ratio and enterprise scale are used as control variables. Through the salary gap related index and the value of the enterprise to establish regression model can analyses the impact of compensation gap on enterprise value. The conclusions are as follows. First,the impact on the enterprise value of executive pay gap is significantly obvious after the financial crisis. Secondly,the specific value of the external executive pay gap has little effect on the value of the enterprise,but its relative value has a strong positive linear relationship with the enterprise value. Thirdly,the correlation between inner salary gap and enterprise value is relatively strong and the influence is stronger after the financial crisis. Finally,suggestions of widen salary gap are provided.