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Can TMT vertical pay disparity promote firm innovation performance? The moderating role of CEO power and board characteristics

Author

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  • Xi Zhong
  • He Wan
  • Ge Ren

Abstract

Purpose - Based on the tournament theory and the principal agent theory, this study aims to empirically investigate how top management team (TMT) vertical pay disparity (the pay disparity between the CEO and non-CEO executives) influences firm innovation performance. Design/methodology/approach - This study empirically tested the hypotheses based on a sample of listed high-tech companies in China during the period between 2007 and 2018. Findings - TMT vertical pay disparity promotes innovation performance; CEO power undermines the positive effect of TMT vertical pay disparity on innovation performance; the negative moderating effect of CEO power is mitigated by board age and gender and educational levels, whereas the proportion of female directors has no such effect at any significant level. Originality/value - This study uniquely contributes to the theoretical and empirical development of tournament theory and the principal agent theory.

Suggested Citation

  • Xi Zhong & He Wan & Ge Ren, 2021. "Can TMT vertical pay disparity promote firm innovation performance? The moderating role of CEO power and board characteristics," European Journal of Innovation Management, Emerald Group Publishing Limited, vol. 25(4), pages 1161-1182, April.
    • Handle: RePEc:eme:ejimpp:ejim-10-2020-0434
    DOI: 10.1108/EJIM-10-2020-0434
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