The Impact Of Corporate Financialization On Internal Pay Gaps

As the foundation of a country’s economy,the development of the real economy requires a good financial environment and business environment.Since the 18th National Congress of the Communist Party of China,it has been constantly emphasizing to open up capital sources through financial channels and send more high-quality resources to serve the original source.On the one hand,an excessive pursuit of financialization by a macroeconomic entity will crowd out physical investment and cause systematic failures.The imbalance between stability and industry development will lead to an economic crisis even more serious.On the other hand,the excessive financialization of individual micro-enterprises will not only waste their own businesses,but will also increase speculative opportunities,which in turn will damage the real economy and the inner governance structure of companies.Also,it will has a potential impact on internal income distribution,which runs counter to the goal of deepening the reform of the income distribution system to form a more reasonableremuneration system.Most of the existing researches on the consequences of corporate financialization focus on the production and operation content of the company’s industrial investment rate,productivity,leverage ratio,innovation level,and operating rate of return.Few of them has conducted in-depth and specific research on the internal human resource elements of the enterprise.As a result,the impact of financial means as an important asset allocation method on the income of internal executives and employees has been ignored.More importantly,the exploration of income distribution reform has never stopped.Only by fully understanding and mastering the source of income and mechanism can we better take into account the fairness and efficiency of distribution.After reading and summarizing the articles about financialization and the pay gap,then this paper chooses to cut in with a microscopic perspective.We select the data of Chinese companies listed on the Shanghai and Shenzhen stock exchanges from 2007 to 2020,and define the proportion of corporate financial asset allocation as corporate financialization metrics,and then discuss the different effects on the company’s internal income entities,as well as the mechanism by operating profits,and carry out a multi-dimensional grouping regression from the motivation of corporate financialization,supplementing the internal impact of corporate financialization.The relevant empirical evidence of the pay gap also has further enriched the correlation between the two.Through the empirical results,the conclusions obtained are as follows:First,the financialization of entity companies has widened the absolute gap in corporate income and narrowed the relative gap,which both have had a more obvious impact.By separating the main body and discussing it separately,it is also possible to clearly understand the difference in the impact of financialization.Second,the level of corporate operating profit plays part of the intermediary role in the relationship between the level of financialization and the salary gap.By clarifying the chain of action,the logical relationship is opened up.Third,regarding the heterogeneity of the financialization of entity firms,whether it is based on the "reservoir"effect or the "profit-seeking" effect motives that allocate financial assets within the enterprise,the salary gap between executives and employees will be affected by the financialization of the enterprise.At the same time,the adverse effects are even worse in companies with poor operating conditions where the "profit-seeking" effect is the mainstay.Once again,the double-edged sword of financialization is verified in reverse.In addition,the final robustness test also proves the reliability of the conclusions of this article.Based on the above conclusions,relevant recommendations are made as follows:Firstly,strengthen the supervision of financial services and create a good environment for industrial development.Relevant government departments need to supervise financial-related fields to prevent the excessive financialization of real enterprises from deviating from the main industry development track,and to control symptomatically based on the heterogeneity of the business status of enterprises.And establishing a more complete financial development framework for the physical industry services which can help finance become a "booster" or"good helper" to promote the development of the main business of the enterprise.Secondly,to optimize the design of the corporate salary system and incentive mechanism from the management perspective.To alleviate the principal-agent problem by establishing and improving the long-term compensation incentive system for enterprise management is an important measure to promote the transparency and scientificity of the salary level of enterprises.Then the opportunistic behavior of the management should be incorporated into the management compensation formulation and evaluation standards,not just a single enterprise performance evaluation to reflect the management’s efforts.In addition to this,listed companies must also reduce the proportion of fixed compensation for executives and increase the proportion of incentive compensation.