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Trust and pay gap: Quasi-natural experimental evidence from China

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  • Yin, Lei
  • Tao, Yunqing
  • Wang, Meng

Abstract

Although the pay gap plays an important role in firm performance, little attention is paid on the impact of trust on within-firm pay gap. Using the construction of China's social trust system as a quasi-natural experiment, we examine the causal effect of trust on within-firm pay gap based on the data of China's A-share listed companies from 2010 to 2018. We find that trust can significantly reduce such gap. Our findings are more pronounced in non-state-owned enterprises, firms with weaker corporate governance, and firms with lower media attention. Finally, we provide evidence that trust enhances firm productivity by reducing pay gap. Overall, this study enriches the research on the driving factors of pay gap at the firm level and the consequences of social trust.

Suggested Citation

  • Yin, Lei & Tao, Yunqing & Wang, Meng, 2022. "Trust and pay gap: Quasi-natural experimental evidence from China," Finance Research Letters, Elsevier, vol. 48(C).
    • Handle: RePEc:eee:finlet:v:48:y:2022:i:c:s1544612322001374
    DOI: 10.1016/j.frl.2022.102865
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    References listed on IDEAS

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    Cited by:

    1. Tao, Yunqing & Kong, Dongmin & Sun, Nan & Li, Xiaofan, 2024. "Social credit and corporate risk-taking: Evidence from China," Research in International Business and Finance, Elsevier, vol. 69(C).
    2. Li, Rui & Xu, Shoufu & Zhang, Yun, 2023. "Can digital transformation reduce within-firm pay inequality? Evidence from China," Economic Modelling, Elsevier, vol. 129(C).
    3. Fang, Hongxing & Chen, Linghong & Xiong, Jiacai & Zhu, Yushu, 2024. "Social Trust and Entrepreneurship: Insights from China's Social Credit System," Finance Research Letters, Elsevier, vol. 62(PA).
    4. Kong, Gaowen & Huang, Jiating & Ma, Guangyuan, 2023. "Anti-corruption and within-firm pay gap: Evidence from China," Pacific-Basin Finance Journal, Elsevier, vol. 79(C).
    5. Khurram, Muhammad Usman & Chen, Lifeng & Abedin, Mohammad Zoynul & Adu, Douglas A. & Lucey, Brian, 2024. "ESG disclosure and internal pay gap: Empirical evidence from China," International Review of Economics & Finance, Elsevier, vol. 92(C), pages 228-244.
    6. Huang, Zhuo & Tao, Yunqing & Zhang, Qidi & Ye, Yongwei, 2023. "The road to entrepreneurship: The effect of China's broadband infrastructure construction," Economic Analysis and Policy, Elsevier, vol. 80(C), pages 1831-1847.
    7. Jin, Gang & Zhang, Jiwen & Ye, Yongwei & Yao, Shiqi & Song, Jingxiang, 2024. "Social insurance law and firm markup in China," Economic Modelling, Elsevier, vol. 132(C).

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    More about this item

    Keywords

    Trust; Pay gap; China's social trust system JEL codes: G3; G38; M52;
    All these keywords.

    JEL classification:

    • G3 - Financial Economics - - Corporate Finance and Governance
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • M52 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects

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