Political Connections, Ownership and Within-Firm Pay Gap

The difference in wages between executives and employees reflects the class conflict corporate governance. To investigate political factors within practice of governance related to employees, this paper empirically tests relationship among connections, ownership within-firm pay gaps. We take A-share listed companies on Shanghai Shenzhen Stock Exchange as example, design hypothesis examine effects connections gap two distinctive groups companies, state-owned enterprises (SOEs) non-stated-owned (non-SOEs). overall result indicates that increase average salary decrease thereby expanding gap. Pay gaps with are 16% higher than without connections. further test results distinguishing property rights show non-SOEs, executives’ compensation resulting an Similar relationships appear SOEs but statistical significance. These findings expand research income distribution theoretically, provide useful insights for SOEs’ reform system practice.