Ownership, Top Executive's Pay Gap and Firm Performance

Using the data of Chinese listed firms during 2005-2008, this paper investigates the incentive function of the top executive's pay gap. The results are: first, the kind of ownership affects pay gap. In state-owned companies, the pay gap is smaller. Second, the performance first increases and then decreases when the pay gap keeps increasing. The kind of ownership affects the point of inflection. In state-owned companies, the point of inflection is smaller.