SALARY GAP AND OPERATING PERFORMANCE: PERSPECTIVE OF TOURNAMENT THEORY

Lee-Wen Yang, Yi-Fang Yang and Wun-Hnog Su

Global Journal of Business Research, 2015, vol. 9, issue 1, 15-26

Abstract: According to the tournament theory, different hierarchies are paid different salaries. The salary gap between different hierarchies can motivate employees. The empirical data are from the 2005-2009 Survey Report of Audit Firms in Taiwan and published by the Financial Supervisory Commission (FSC). The hierarchy in audit firms is divided into certificate accountant, officer, assistant officer, and assistant. This study investigates the relationship between the salary gap in different hierarchies in the workplace and the operating performance of audit firms in Taiwan. The empirical results are consistent with the tournament theory and show that the salary differences in different hierarchies are statistically and positively related to the operating performance. The salary gap increases with the rise of hierarchies in audit firms. Employees in audit firms obtain promotion opportunities by continuously competing with coworkers. Accordingly, the association between operating performance and salary difference between certificate accountants and officers is the greatest. The salary gap increases with each level of the hierarchy along with promotion incentives for employees

Keywords: Salary Gap; Tournament Theory; Operating Performance; Audit Firms (search for similar items in EconPapers)
JEL-codes: M42 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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