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Digital Transformation and Within-Firm Pay Gap: Evidence from China

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  • Gaowen Kong
  • Jiating Huang
  • Shasha Liu

Abstract

This paper examines the effect of digital transformation on pay gap between executives and employees using a large panel of listed companies in China spanning 2013–2020. Baseline results show that digital transformation of enterprises can largely increase the pay gap. Mechanism tests show that the digital transformation of enterprises increases the income of executives and ordinary employees, and the income of executives is increasing faster than ordinary employees. Furthermore, employee’s skill level is an important influence mechanism of the effect of digital transformation on within pay gap. Heterogeneity analysis finds that this effect is more pronounced in firms with fierce industry competition, traditional firms, large firms, and firms with lower shareholdings of executives. Lastly, we find that the pay gap induced by digital transformation enhances corporate performance. Overall, this study complements the determinants of compensation structure from a new perspective of digital transformation.

Suggested Citation

  • Gaowen Kong & Jiating Huang & Shasha Liu, 2023. "Digital Transformation and Within-Firm Pay Gap: Evidence from China," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 59(6), pages 1748-1766, May.
    • Handle: RePEc:mes:emfitr:v:59:y:2023:i:6:p:1748-1766
    DOI: 10.1080/1540496X.2022.2149262
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    Citations

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    Cited by:

    1. Liu, Shasha & Kong, Dongmin & Zhang, Jian, 2024. "Air pollution-induced brain drain: Evidence from inventor mobility," International Review of Financial Analysis, Elsevier, vol. 91(C).
    2. Yue, Jun & Li, Yilin, 2023. "Media attention and corporate greenwashing behavior: Evidence from China," Finance Research Letters, Elsevier, vol. 55(PB).
    3. Guo, Heng, 2023. "Enterprise litigation risk and risk taking," Finance Research Letters, Elsevier, vol. 58(PA).
    4. Zhou, Bole & Ma, Lili & Yang, Shenghao, 2024. "Catering behaviors in corporate digitization disclosures: Identification and analyst forecast accuracy loss," Research in International Business and Finance, Elsevier, vol. 68(C).
    5. Jiang, Airu, 2023. "The impact of digital finance on online shopping," Finance Research Letters, Elsevier, vol. 56(C).
    6. Li, Wentao & Li, Xue & Peng, Lanying & Yao, Zhenye, 2024. "Impact of interlocking directors with digital experience on corporate digitalization: Evidence from China," Finance Research Letters, Elsevier, vol. 62(PA).
    7. Cheng, Jiangyan & Wei, Hongmao, 2024. "Digital tax collection and corporate job creation: An analysis based on the quasinatural experiment of Golden Tax Phase III," Finance Research Letters, Elsevier, vol. 66(C).
    8. Xuan, Ziyue & Guo, Wenting & Lan, Faqin, 2023. "Underwriters interest binding and IPO underpricing," Finance Research Letters, Elsevier, vol. 57(C).
    9. Jia, Shanghui & Guo, Nannan & Liu, Yingke, 2023. "Electricity shortage and corporate digital transformation: Evidence from China's listed firms," Finance Research Letters, Elsevier, vol. 57(C).
    10. Liu, Shasha & Zhao, Huixian & Kong, Gaowen, 2023. "Enterprise digital transformation, breadth of ownership and stock price volatility," International Review of Financial Analysis, Elsevier, vol. 89(C).
    11. Zhu, Wenpeng, 2023. "Digital financial inclusion and the share of labor income: Firm-level evidence," Finance Research Letters, Elsevier, vol. 56(C).
    12. Song, Xiaofei & Fan, Hong & Zhou, Lei & San, Ziyao, 2024. "Executive-employee pay gap and professor directors: Evidence from China," Pacific-Basin Finance Journal, Elsevier, vol. 86(C).
    13. Li, Wentao & Li, Xue & Peng, Lanying & Ning, Chong, 2024. "Silent actions: Digital transformation in private enterprises with state equity participation," Finance Research Letters, Elsevier, vol. 65(C).

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