Executive Compensation Gap And Corporate Risk-taking

In view of an existing circumstance that executive compensation in listed companies have kept rising over the years,through the use of the Chinese A-share listed companies sample from 2010 to 2015,this paper first verifies the existence of the peer effect in executive compensation.If the executive compensation level of a company is lower than the industry median level in the year before,this company is more likely to increase its executive compensation level in the next year.When there is a compensation gap between the company and the industry,the company will adjust the executive compensation.In order to explore whether the executive should have a salary increase and this increase should be to what extent that can bring incentive effect,this paper then examines this issue from the angle of corporate risk-taking.The empirical results show that,firstly,the peer executive compensation gap is significant positively correlated with the corporate risk-taking,which shows that the salary increase of the executive can bring the incentive effect.Secondly,through regressing executive compensation subsamples respectively divided by positive and negative,we find that when the gap is positive number,the relationship between the two variables remains significant;But when the gap is negative number,the relationship between the two variables is not significant anymore.Through further research,we find that the effect of peer compensation gap on corporate risk-taking is different under different property rights.The practical significance of this paper is to find a measure standard-the industry median level of executive compensation that whether the salary increase is valuable.When the executive compensation level of a company is lower than the industry median level,the company must pay a raise to executives and reach above industry median level,otherwise the salary increase is only a futile loss for the company rather than a value increase.When the executive compensation level of a company is higher than the industry median level,the salary increase can increase corporate risk-taking and improve the value of the enterprise.