Empirical Study on Diversification Strategy, CEO Compensation Gap Design and Company Performance

摘要

The study explores the moderating effects of CEO compensation gap on the relationship between diversification strategy and corporate performance from top management team coordination perspective. Furthermore, the author puts forward two competing hypotheses based on behavior theory and tournament theory. 797 Sample companies are listed companies selected from Shanghai and Shenzhen Stock Exchanges. Empirical results show that damage of corporate diversification strategy to corporate performance may be due to the existence of moral hazard during strategy implementation by senior executives. Thus enlarging CEO compensation gap can effectively align interests between managers and shareholders, indicating that tournament theory dominate solving the coordination problems of top management team in the context of China's institutional backgrounds,and the theory can play a greater strategic support effect.