An Empirical Study On The Impact Of Executive Pay Gap On Inefficient Investment

Investment efficiency has received high attention of scholars and become an important topic.Studies have found that,agency problems which produced by the separation of ownership and managerial authority is one of the important reasons to induce the investment efficiency,so the executive compensation become a crucial incentive mechanism to solve the problem of agency.In recent years,about the relationship between the executive pay gap and the efficiency of investment,research conclusion is not consistent,so this article will study the efficiency of investment from two aspects from internal and external gap of the executive pay.The pay gap is a significant mechanism to stimulate executives,in recent years,there are so much sky-high compensation and bigger executive pay gap,but it doesn't seem that the executive have been inspired.Tournament theory and Behavior theory as the theory foundation to study the impact of executive internal pay gap on the efficiency of investment theory,executive internal pay gap and the efficiency of investment is u-shaped curve relationship,and the conclusion is tenable through the empirical study.The executive internal pay gap increases gradually,senior level executives feel being trust and recognized,low level executives also think the gap is a feasible goal,this will become a positive power to improve the efficiency of group decision.But when executive internal pay gap further over a reasonable gap,senior level executives will pay more attention to defend the rationality of high salary,low level executives think it's unfair,which is accordant the behavior theory that injustice produce destructive competition and it will seriously restrict the development of the company,increase the efficiency of investment.The executive external pay gap on the basis of industry compensation which is different from the executive internal pay gap,Manager Market theory as the theoretical support of research,the study found that executive external pay gap had u-shaped curve relationship with the efficiency of investment.The legal system and reputation mechanism in manager market will deep greatlyreduce opportunistic behavior of managers.If the executive external pay gap in the same industry is in the reasonable scope,executives will follow the rules to establish a good reputation and status to make decision carefully.But the executive external pay gap over a reasonable scope,intense competition makes executives in the same industry to compete for resources and occur the behavior of investment efficiency.In the meanwhile the bigger gap is considered to be the behavior of the executive power,rather than effective market pricing,so it causes the market failure and it is easy to produce moral problems and adverse selection problem to promote the behavior of investment efficiency.The article focuses on the correlation betweenexecutive internal and external pay gaps and inefficient investment.It not only considers the internal environment of the company's senior management team,but also considers the external manager's external market environment,and enriches the related theoretical research of the pay incentive theory and investment theory.Pay gap,as an important factor affecting non-efficiency investment,provides a standardization tool for reducing the company's non-efficiency behavior,and provides a double consideration of internal and external pay gaps,which is conducive to the optimization of corporate executive compensation system.The establishment of the remuneration system reform and compensation incentive system will improve the status of inefficient investment,optimize the allocation of enterprise resources,and promote the overall economic development of the country.