Top Management Promotion,Pay Gap And Capital Allocation Of Internal Capital Market

In recent years,with the rapid development of China's securities market,a large number of top management promotions have emerged.According to CSMAR,there were 467 public companies which changed their chairmen and 608 public companies which changed their CEO in 2016.Top management turnover is a kind of encouraging and binding mechanism,and whether the executive get a promotion depends on company performances,so the executive may transfer profit by related transactions in the internal capital market to manipulate the company's performance.Firstly,the relevant literatures about top management promotions,pay gap and the distribution of resources in the internal capital market will be systematically presented and analyzed.Secondly,this paper selects the data of listed company clusters in Shanghai and Shenzhen stock market from 2005 to 2016 as samples,and manually searches manager's new after leaving as an indicator of top management promotions.Finally,this paper selects net related transaction,net affiliated guarantee and net intra-group loan to measure related transactions in the internal capital markets,calculate the efficiency of resource distribution by the method of cash flow sensitivity coefficient,and applies empirical analyses to investigate and explore the relationships between top management promotions,pay gap and the distribution of resources in the internal capital market.A conclusion has been made by regression analytical studies:(1)Top management promotions have positive effect on the distribution of resources in the internal capital market,which proves that comparing with the executives who did not get promoted,the executives who got promoted input more interests from the internal capital market.(2)After executives leaving,the interests of company inputting from the internal capital market will gradually decrease.(3)Top management promotions have negative effect on the efficiency of resource distribution in the internal capital market,which proves that comparing with the executives who did not get promoted,the executives who got promoted are more likely to manipulate surplus using related transactions,which doing damage to the efficiency of resource distribution.(4)Pay gap has positive regulating effect on above three relations.Although the researches on top management promotions and internal capital market have formed into a perfect system,few scholars pay attention to profit transfer in the internal capital market before turnover.This thesis not only aim to enrich the existing articles but also look forward to provide some meaningful points about the efficiency of resource distribution,helping regulate inner governance and perfect information disclosure system of a company.