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EFFECTS OF EXECUTIVE PAY GAP AND BOARD CAPITAL ON ENTERPRISE INNOVATION INVESTMENT: A CASE STUDY BASED ON HIGH-TECH LISTED COMPANIES⁴
Xinxin Jing, Ruchuan Jiang, Na Zhao, Xinrui Lin

ABSTRACT. Enterprise offers different levels of pay gaps as effective incentives for executives. However, the executive pay gap may create a perception of unfairness among executives with lower payment although it can promote enterprise innovation investment, thus hindering enterprise innovation investment. To explore the influencing mechanisms of the executive pay gap and board capital on enterprise innovation investment, a fixed-effect panel model was constructed on the basis of high-tech listed companies in the A-shares of Shanghai Stock Exchange and Shenzhen Stock Exchange of China during 2011-2018. Based on this mode, independent effects of the executive pay gap and board capital, as well as their collaborative effects on enterprise innovation investment, were investigated. Results demonstrate that long- and short-term executive pay gaps have significant positive impacts on enterprise innovation investment. Such positive impacts of the long-term executive pay gap are more prominent than those of the short-term one. Career background of board human capital can significantly promote enterprise innovation investment, whereas chain directors largely inhibit enterprise innovation investment. Furthermore, the short-term executive pay gap and career background of board human capital provide considerable complementary effects to enterprise innovation investment. Conclusions obtained from this study can provide enterprises theoretical supports and beneficial references to formulate effective pay incentive mechanisms for executives and perfect the board governance mechanism .

KEYWORDS:  executive pay gap, board capital, enterprise innovation investment.

JEL classification:  Q23, Q28, I31, O12, C3.

⁴Acknowledgements:  This study was supported by Shandong Province Colleges and Universities Young and Innovative Talents Program, Shandong Social Science Planning Project (No. 20CCXJ11). Youth project of Shandong Province Natural Science Foundation (No. ZR2020QG020), Key Projects of Financial Application in Shandong Province (No. 2020-JRZZ-08).