The Impact Of Executive Compensation Gap On Corporate Cash Holdings

For a long time,cash is regarded as the "blood" of an enterprise,which is very important for the development of an enterprise.With the increase of the external compensation gap of executives,the level of cash holdings may also have an important impact.The theoretical analysis holds that the higher the salary gap is,the higher the level of the senior executives dislike the risk.In order to avoid the risk,the executives will raise the level of the firm's cash holdings;the greater the negative salary gap,the stronger the executives' motivation to use the cash to obtain private income,thus reducing the level of the firm's cash holdings.However,the research on the influencing factors of cash holdings seems to have not seen the empirical analysis from the perspective of executive compensation gap,which has contributed to the motivation of this study.In order to explore the specific impact of executive external pay gap on cash holdings,this paper takes the A-Share Listed Companies in Shenzhen and Shanghai as research samples for 2010-2016 years to carry out an empirical test.The main contents of the study include three aspects.The first aspect is to analyze the impact of executives' external pay gap on cash holdings.The second aspect is to examine whether executives' external pay gap is mediated by investment efficiency and then has an impact on corporate cash holdings.The third aspect is to analyze the impact of executives' external compensation gap on cash holdings based on the nature of property rights.The conclusions are as follows:First,compared with the negative salary gap between senior executives,executives' external pay is more cash to the enterprises with gap,and the positive external compensation gap is positively related to cash holdings;the negative external compensation gap is negatively related to cash holdings;second,the positive gap between senior executives is through insufficient investment to raise the level of cash holdings,and the negative gap is through the gap.Excessive investment can reduce the level of corporate cash holdings.Third,combined with the nature of property rights,we analyze the impact of executive compensation on cash holdings.The results show that both state-owned enterprises and non-state-owned enterprises have positive correlation with corporate cash holdings,while the negative external compensation gap of executives is negatively related to corporate cash holdings,but this phenomenon is more significant in state-owned enterprises;fourth,the intermediary effect of insufficient investment is analyzed in the nature of property rights.The results show that in state-owned enterprises,the mediating effect of underinvestment is not significant.In non-state-owned enterprises,the intermediary effect of insufficient investment is significant,that is,the external compensation gap of senior executives of non-state-owned enterprises is to affect cash holdings through insufficient investment.The results of this study enrich the research on the external compensation gap of senior executives,and also enrich the research on the level of cash holdings,and provide some reference for the later scholars to study the issue of executive external compensation gap.At the same time,the conclusion of this paper provides some suggestions for enterprises to formulate executive compensation policies.Enterprises should avoid excessive executive compensation,so as not to widen the external compensation gap of senior executives.It is necessary to maintain executive compensation at the average level of the industry,and combine other executive incentive methods to motivate the executives,thus helping the enterprises to maintain the best level of cash holding and reduce agency costs.The value of the present enterprise is maximized.