Research On The Influence Of Pay Dispersion On Firm Performance

Salary distribution within the enterprise, involving the issures of fairness and efficiency, has widely attracted public attention.Since the reform and opening up,our government to enterprise's reform is a process of devoluting the power to businesses, emphasizing the priority to efficiency,which also focuses on the reform of the salary system for two reasons:First is linking compensation to firm(work) performance;second is widening salary gap, in order to have positive incentive effects on both executives and employees.However, with the maturity of the market economy,the deepening of enterprise reform,the pay dispersion between executives and ordinary workers growes wide disparity, combining with the general public attention on egalitarianism and salary equity, making the size of the pay dispersion and its incentive effects on performance become one of the hot topics in recent years.About the incentive effects of the pay dispersion inside the enterprise,it has also formed two representative theories in the academic circles.Tournament theory holds that the larger pay gap will stimulate the motivation of staff, the upward competition in the organization, the degree of efforts involved in work and then improve firm performance.Behavior theory agrees that excessive pay dispersion will reduce the cooperation between members of the organization,so as to produce a sense of injustice,which is not conducive to the improvement of firm performance.Both views have been supported by empirical data.Based on the A-share China's listed companies from 2009 to 2014 for empirical research as data samples,this paper verifies the influence of internal pay dispersion on firm performance.Meanwhile,this article also discusses the reasons why there are two distinct relations between internal pay dispersion and enterprise performance.Through the analysis of the mechanism of tournament theory and behavioral theory,this paper makes a research on the moderating effects of enterprise growth and internal cooperation needs on the relationship between the two variables.The empirical results show that:1.Under the total sample, the internal pay dispersion is positively related to performance within the enterprises of our country,2.Growth of company positively regulates the relationship between pay gap and performance;3.Internal coordination needs have negative impact on the relationship of the pay gap and performance.4.Wheather they are state-owned enterprises or not, the relationship between pay gap and firm performance will be significantly different.The study concludes that the level of enterprise growth and the degree of attaching importance to cooperation may be the two reasons why there are two completely opposite relations between pay gap and company performance.When growth is high or internal collaboration needs is low, companies tend to encourage competitive behaviors,and tournament theory will play a greater role;Otherwise, the enterprise will strongly support the cooperative behaviors among employees,and then it is suitable to be explained by behavior theory.Combined with the enterprise life cycle theory, this paper finally attempts to answer the different application of two theories in explaining the relationship between the two variables,which would also provide a new perspective for the study of the relationship between pay dispersion and firm performance.