GOVERNMENT REGULATION AND PAY DISPERSION WITHIN MANAGEMENT TEAM: EVIDENCE FROM CHINA

This study investigates the determinants of pay dispersion within top management team (referred as TMT pay gap). We firstly build an analytical model with promotion incentive and pay equity, and give the way how these two factors impact the TMT pay gap. Then in the context of government regulation in China, we investigate the impact of government regulation on TMT pay gap and the mediation effect on promotion incentive and pay equity. Using a sample, ranging from 2006 through 2015, this paper investigates the relationships above. Consistent with the related hypothesis, empirical results show that the increase of TMT pay gap can decrease the probability of promotion incentive, and decrease the pay equity within top management team. Besides, government regulation plays a significant role on decreasing TMT pay gap, and government regulation mitigates the relationship between TMT pay gap and promotion incentive, and enhances the relationship between TMT pay gap and pay equity.