Pay disparity within top management teams, real earnings management, and firm value: destructive competition or value creation? A moderated mediating model

ABSTRACT

This article examines the impact of pay disparity within the top management team (TMT) on real earnings management. Using data from Chinese listed firms for the period 2007 to 2018, we find that pay disparity within TMT has a negative impact on real earnings management and this relationship further enhances firms’ value, which supports internal governance view. Moreover, the indirect effect is stronger when product market competition is high. Results hold for both accounting and market firm value measures.

KEYWORDS:

• Pay disparity
• top management team
• real earnings management
• product market competition
• firm value

JEL CLASSIFICATION:

• J30
• M41
• G32

Disclosure statement

No potential conflict of interest was reported by the authors.

Correction Statement

This article has been republished with minor changes. These changes do not impact the academic content of the article.

Notes

¹ Source: https://www2.deloitte.com/content/dam/Deloitte/cn/Documents/human-capital/deloitte-cn-hc-2019-a-share-executives-salary-report-zh-190723.pdf

² Tables are not presented due to word limit. Contact the author if required.

Additional information

Funding

This work was supported by the Jiangsu University of Technology under Grant [KYY16509] and Department of Education of Guangdong Province under Grant [2020GXJK233].