An International Comparative On The Relationship Of Compensation Gap Of Top Management Team And Corporation Performance In Service Industry

In recent years,the compensation of the top management team has become one of the hotspots of the media and academia.Lots of discussions were made on this topic and the research perspectives have become very pluralistic since the Wall Street occupation.During these research,especially,the executive compensation gap has become one of the foci of institutions and academics.The initial purpose of the compensation system is to aim at the principal-agent problem and guarantee the interest of shareholders.Then it is very important to know whether the compensation gap will actually satisfy the target corporation performance or not.However,two opposite views of the relationship between the executive compensation gap and the cooperation performance exist : one thinks that larger gaps helps to encourage the executives and will result in good corporation performance;the other one,on the contrary,thinks that smaller gaps will increase collaboration which is better for performance increase.Naturally,we will consider if there is a static relationship between the executive compensation gap and the corporation performance and if this relationship will vary among different countries or not.To answer the above two questions,we study the relationship between executive compensation gap and corporation performance among China,America,and Germany by taking the listed service companies as examples,which take a major part of the three countries' GDP.This thesis starts with two theories(tournament theory and behavioral theory)of compensation gaps for the top management team.Current literature related to the influence factor of corporation performance and the relationship between compensation gap and corporation performance has been reviewed.Taking the listed services companies as an object,the financial data between the year 2012 to 2015 of 435 Chinese companies,165 American companies,and 67 German companies are collected and analyzed through an empirical approach.Finally,we come to the following three conclusions: First,from the current situation,the compensation gaps are expanding in all three countries,while the gap in Germany is a lot smaller than the other two(America has a bigger gap than China).Second,the financial industry shows a greater number for compensation gap when compared to others.Third,from the view of the relationship between the compensation gap and the corporation performance,the Chinese listed companies show an upside down U-curve,while the American and German companies show a proportional one.This thesis also verified the applicability of the two theories to the three countries.The tournament theory can reasonably explain the relationship between compensation gap and corporation performance of both American and German companies.In China,however,the tournament theory can explain the low range of compensation gap,while the behavioral theory plays a more dominant role in the high range of compensation gap.