Compensation Gap of Executive Team and Innovation Efficiency

Based on the research of domestic and foreign scholars, this paper combines China’s unique economic environment and institutional background, based on the principal-agent theory and the tournament theory, and takes the data of 2007-2016 A-share listed companies in Shanghai and Shenzhen stock exchanges as the sample. This article studies the relationship between pay gaps and innovation efficiency within executive teams. Research shows that there is a significant negative correlation between the salary gap of executive teams and the innovation efficiency, indicating that the larger the salary gap of executive teams, the lower the efficiency of R & D investment. The results are consistent with the argument that larger tournament incentives allow managers to make less efficient R & D investments.