A Study On The Influence Of The Compensation Gap Between "Returned" And "Local" Executives On Corporate Performance

In recent years,with the continuous development of China's economy and society,and government departments issued a series of policies to attract high-level overseas talents and plans to introduce overseas Chinese,so more and more students choose to development,which played a very important role for Chinese science,technology and high-tech industries development.In the research on returnee executives,scholars generally agree with the technology premium effect that returnee executives bring to companies.Many studies and reports also show that people with a background of returnees can earn a more lucrative income under the same conditions.Since the 1980 s,the research on the relationship between executive pay gap and corporate performance has become a hot issue.The pay gap between executive teams will affect the psychological state and behavioral performance of executives,and then may have a certain impact on corporate performance.So for companies with returnee executives,is there a significant pay gap between returnee executives and local executives? If there is a clear pay gap,will the pay gap between returnees and local executives have an impact on corporate performance? This is the main issue to be discussed in this paper.This paper uses all A-share listed companies with returnees background(except independent directors)as samples from 2008 to 2017 to study the relationship between the pay gap between returnees and local executives and corporate performance.The results show that,on the whole,the pay gap between returnees and local executives is negatively correlated with corporate performance,which is especially significant for enterprises with large pay gap.For the enterprises with smaller pay gap,a moderate increase in the pay gap will not only not reduce,but also improve the performance of enterprises.Through the analysis of heterogeneity,we can find that:(1)compared with having overseas education experience(obtaining a certain degree certificate),the salary increase brought by overseas work experience alone will cause a more significant decline in corporate performance;(2)compared with private enterprises,the performance loss caused by the salary gap is more significant in the state-owned enterprises;(3)compared with Western enterprises.Within the enterprises in the central and eastern regions where the economy is more developed,the negative effect of the pay gap between returnees and local executives is more significant;(4)Compared with non-high-tech companies,the pay gap between returnees and local executives of high-tech listed companies does not have a significant negative impact on corporate performance.In the next study,this paper first explores the impact mechanism of the increase of the pay gap between returnees and local executives leading to the decline of corporate performance.The results show that the generation and aggravation of corporate internal friction are the main factors leading to the decline of corporate performance.Specifically,this paper finds that the increase of the pay gap between overseas returnees and local executives will result in the rise of management costs and on-the-job consumption,reduce the overall internal control level of the company,and then directly or indirectly reduce the company's performance.Secondly,this paper carries on the robustness analysis from the following aspects: on the one hand,this paper verifies the robustness of the conclusion by replacing the enterprise performance variables.On the other hand,this paper uses instrumental variable method and Heckman two-stage method to test the possible endogenous problems,and proves the conclusion of this paper from different angles and dimensions that the pay gap between returnees and local executives will indeed reduce corporate performance.In the conclusion part,this paper puts forward that the incentive mechanism and incentive system of senior managers should be improved,and different strategies and suggestions should be given from different industries and regions.This paper takes the salary incentive of returnee executives as a starting point,studies the impact of the pay gap between returnee and local executives on corporate performance,and enriches the relevant research on the relationship between the pay gap of senior management team and corporate performance.In addition,this paper further classifies the two different backgrounds of returnees,namely,overseas study and overseas work,and refines the research level.This paper also makes a comparative study of corporate samples under different ownership,different regions and different levels of innovation,and combines the related research on internal friction of companies,systematically analyses the interaction between them and the impact on corporate performance,which provides a new direction for the study of pay gap and corporate performance.Finally,the conclusion of this study provides a reference for the establishment of enterprise compensation system and the improvement of incentive mechanism.