TITLE:
Compensation Gap of Executive Team and Innovation Efficiency
AUTHORS:
Beibei Wang
KEYWORDS:
The Tournament Theory, Salary Gap of Executive Teams, Efficiency of R & D
JOURNAL NAME:
Modern Economy,
Vol.11 No.2,
February
4,
2020
ABSTRACT: Based on the research of domestic and foreign
scholars, this paper combines China’s unique economic environment and
institutional background, based on the principal-agent theory and the
tournament theory, and takes the data of 2007-2016 A-share listed companies in
Shanghai and Shenzhen stock exchanges as the sample. This article studies the
relationship between pay gaps and innovation efficiency within executive teams.
Research shows that there is a significant negative correlation between the
salary gap of executive teams and the innovation efficiency, indicating that
the larger the salary gap of executive teams, the lower the efficiency of R
& D investment. The results are consistent with the argument that larger
tournament incentives allow managers to make less efficient R & D
investments.