Research on the Relationship between Compensation Gaps of Executive-staff and Corporate Performance

Abstract

This paper aims at exploring the relationship between the corporate performance and compensation gaps of executive-staff, by using the samples of Chinese firms from Shanghai Stock Exchange over the period of 2005-2015. We measured the corporate performance by computing the return on equity. And we also used the average compensation of the top three executives divided by the average of the ordinary employees to quantify the compensation gap. Ultimately, we conclude that there is a significant “inverse U†relationship between the compensation gap and the corporate performance.