Author(s)

Mingyu Zou

Corresponding Author

Mingyu Zou

Abstract

At a time when a large amount of capital is focusing on corporate social responsibility, examining the relationship between the executive-employee pay gap and the risk of stock price crash risk can help us clarify the link between the distribution of compensation within the company and the performance of the stock market. This paper uses the data of all A-share listed companies from 2011 to 2022, and uses regression analysis to study the impact of internal pay gap on stock price crash risk. Research shows that large executive-employee pay gaps significantly increase the risk of stock price crashes. Moreover, the positive impact of the pay gap on the risk of stock price crash is exacerbated by the inequality aversion of market investors. Heterogeneity analysis found that in state-owned enterprises, the pay gap between executives and employees was more strongly correlated with the risk of stock price crash.

Keywords

Pay gap; Stock price crash risk; Inequality aversion