Firm Size, Pay Gap and Firm Performance

Chunyan Chen; Huobao Xie
March 2013
Journal of Convergence Information Technology;Mar2013, Vol. 8 Issue 5, p38
Academic Journal
With the increase of executive pay and the disclosure of executive sky-high compensation events, people start to query about the incentive mechanism based on executive pay level and pay more attention to one based on executive pay structure, and have gradually formed two opposite opinions-- --tournament theory and behavior theory. This paper makes an analysis of the relation between executive pay structure and firm performance among large and small firms. The result indicates that competitive pay structure has a positive effect on firm performance. Furthermore, large firms are more appropriate to apply tournament theory than small firms.


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