Executives External Pay Gap, Ownership Concentration and Corporate Performance

Abstract

Researches on the influence of external pay gap of executives on corporate performance have not come to a unanimous conclusion, and studies that the ownership structure was involved in their relationship have not been confirmed. This paper attempts to study the influence of external pay gap of executives on the corporate performance as well as the function of ownership concentration on the pay gap from the perspective of external equity. The empirical results show that the positive gap has a positive influence on the corporate performance, and this kind of influence is reduced with the increase in the gap, and the negative pay gap has no significant correlation with the firm performance. Meanwhile, the higher the ownership concentration ratio is, the smaller the executives external pay gap will be. Empirical results indicate that these listed companies in China should raise the pay gap to maintain the incentive energy and the ownership structure reform could bring change in the pay gap. Index Terms - External pay gap, tournament theory, behavior theory, ownership concentration