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|Other Titles:||Relationships among Uncertainty, Top Management Pay Gap and Firm Performance: A Tale of Tournament Theory|
Tournament theory;Pay gap;Uncertainty;Performance
|Issue Date:||2016-05-31 16:24:57 (UTC+8)|
Tournament theory asserts that top management pay gaps reduce the need of costly supervision and provides the incentive alignment of CEO and shareholders as monitoring become tougher. Monitoring is particularly difficult in uncertain environments. Based on the tournament theory, this paper predicts that top management pay gaps will be greater in firms with higher uncertainty. That is, the phenomenon that the larger pay gap exists between firm’s CEO and its other top executive is more. Furthermore, the combination of higher uncertainty and greater top management pay gaps will enhance firm performance. Such uncertainty is also known as firm risk and noise in earnings. This paper considered these two different types of uncertainty. Using the research samples of firms listed in the Taiwan Stock Exchange and OTC stock exchange, this paper used the tournament theory to test whether top management pay gaps are greater in higher uncertain environments. Does the combination of higher uncertainty and greater top management pay gaps enhance firm performance? Most of the predictions of tournament theories can be supported by empirical results in this study.
International Journal of Accounting Studies
|Appears in Collections:||[International Journal of Accounting Studies] Journal Articles|
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