Managerial Power,Compensation Gap And Investment Efficiency

The management layer of listed companies,as the maker of business strategy and the guide of survival and development,plays an important role in decision-making and governance in the process of business operation.Based on the Principal-agent theory and Information Asymmetry theory,the theory of the Managerial Power is proposed.The theory holds that in the case of defects in corporate governance,the management layer will make decisions beyond its due control according to its own will.As an indispensable activity for enterprise development and cash flow growth,investment efficiency is also crucial for the future development of enterprises.The management will have a significant impact on the company’s investment activities for the sake of the company and its own interests,and may make blind investment for the sake of interests or personal performance,resulting in excessive investment;It is also possible that in order to promote and position,excessive risk aversion,abandon the prospect of lucrative investment projects,resulting in underinvestment.However,due to the particularity of China’s institutional environment,the difference in the nature of enterprise property rights and the imperfect governance structure,scholars still have not reached a relatively consistent conclusion on the impact mechanism of management power on investment efficiency.At the same time,the phenomenon that the executive receives high salary but the performance of the enterprise remains low occurs from time to time,and the positive incentive effect of salary is questioned.Existing studies focus on the relationship between the pay gap and corporate performance,but there are few studies on how the pay gap affects corporate performance,that is,how the pay gap affects investment efficiency and other aspects.With the purpose to offer effective suggestions to improve investment efficiency,this paper mainly analyzes the relationship between managerial power,salary gap and investment efficiency of private listed companies in China.This paper studies the changes of executive compensation gap and investment efficiency under the influence of managerial power,and examines the mediating role of the internal compensation gap between senior executives and employees and the external compensation gap between senior executives and the same industry in the internal mechanism of the effect of managerial power on investment efficiency.At the same time,examine the moderating effect of internal control on the relationship between managerial power and investment efficiency.Based on Principal-agent theory,Managerial Power Approach and Tournament theory,this paper adopts normative and empirical methods to study the mediating effect of executive-employee internal pay gap and executive-executive external pay gap in the same industry on the relationship between managerial power and investment efficiency.The empirical study shows that in private listed companies in China,the managerial power within the appropriate scope has a significant inhibitory effect on non-efficiency investment.In private listed companies with more powerful management,the executive-employee internal salary gap and executive-executive external salarygap in the same industry are also larger.Both the executive-employee internal pay gap and the executive external pay gap have some mediating effects on the positive relationship between managerial power and investment efficiency.In addition,this paper also examines the moderating effect of internal control on the relationship between managerial power and investment efficiency.Empirical results show that effective internal control can enhance the inhibiting effect of managerial power on non-efficiency investment.