Executive-employee pay gap and professor directors: Evidence from China

Xiaofei Song, Hong Fan, Lei Zhou and Ziyao San

Pacific-Basin Finance Journal, 2024, vol. 86, issue C

Abstract: This study investigates the impact of professor-directors on the executive-employee pay gap in public Chinese firms. University professors have a reputation for maintaining higher ethical standards, so there is a societal expectation that professor-directors will advocate for social responsibility. Failure to do so will incur reputational costs for professor-directors. Consistent with this view, we find that the executive-employee pay gap is negatively associated with the presence of professors on the board. Additional evidence suggests that the negative impact of professor-directors on the executive-employee pay gap is the result of higher employee salaries and lower executive compensation. Our findings are more pronounced in a strong governance setting where independent directors are more effective, namely after the launch of the anti-corruption campaign in China, in firms with a greater proportion of independent board members, and in more mature firms. Moreover, the influence of professor-directors is primarily seen in certain subgroups that have high reputation costs, such as those associated with esteemed institutions or younger individuals, and in subgroups with low inclination toward tournament theory, such as those specializing in science or without overseas education and experience. Our findings withstand numerous robustness tests, including an instrumental approach to address endogeneity concerns.

Keywords: Executive; Employee pay gap; Professor–directors; Income equality (search for similar items in EconPapers)
JEL-codes: G30 G38 (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0927538X24001768
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:pacfin:v:86:y:2024:i:c:s0927538x24001768

DOI: 10.1016/j.pacfin.2024.102425

Access Statistics for this article

Pacific-Basin Finance Journal is currently edited by K. Chan and S. Ghon Rhee

More articles in Pacific-Basin Finance Journal from Elsevier
Bibliographic data for series maintained by Catherine Liu ().