Han, Feng, Tee, Kienpin, Hao, Siyuan, and Xiong, Rancen (2024) Does unfairness reduce efficiency? Within-industry CEO pay inequity and firm efficiency in China. Finance Research Letters, 62. 105137.

PDF (Published version) - Published Version Restricted to Repository staff only

Abstract

This paper investigates the impact of CEO pay inequity within an industry on firm efficiency. We measure within-industry pay inequity as the difference in compensation between a firm's CEO and the second-highest-paid CEO in the same industry (or in the same size-industry group). Using R&D expenses and capital expenditures as the inputs, we construct data envelopment analysis (DEA) and stochastic frontier analysis (SFA) scores to evaluate firm efficiency. We find that within-industry CEO pay inequity is negatively associated with firm efficiency. We further show a significantly negative impact of within-industry CEO pay inequity on firm performance (ROA and Tobin's q). Overall, our findings highlight the destructive effect of CEO pay inequity within an industry which dampens executive motivation and leads to reduced firm efficiency, supporting relative deprivation theory and equity theory, the two major theories of perceived distributive injustice.

Item ID:	85117
Item Type:	Article (Research - C1)
ISSN:	1544-6131
Copyright Information:	© 2024 Elsevier Inc. All rights reserved.
Date Deposited:	16 Dec 2025 04:43
FoR Codes:	35 COMMERCE, MANAGEMENT, TOURISM AND SERVICES > 3505 Human resources and industrial relations > 350502 Employment equity and diversity @ 100%
SEO Codes:	28 EXPANDING KNOWLEDGE > 2801 Expanding knowledge > 280106 Expanding knowledge in commerce, management, tourism and services @ 100%
Downloads:	Total: 1 Last 12 Months: 1
	More Statistics