Role of Knowledge Coordination Needs within Top Management Team in Setting Executive Compensation Gap: Evidence from China

This paper examines the determining mechanism of executive compensation gap (ECG) by initiatively introducing the concept of knowledge coordination needs (KCN) as the critical antecedent, since the relationship between KCN and ECG is still unexplored to date, particularly in china. Based on economic view and behavioral view, two competitive hypotheses on the effect of KCN on ECG are respectively proposed. By adopting the listed companies in Chinese manufacturing industry over the period of 2009-2013 as the sample, both multiple linear regression and hierarchical linear regression results confirm that KCN has positive effect on ECG. Our finding suggests that under the condition of higher KCN, it is much more important for the board to align interests between the shareholders and the top executives by enlarging ECG than to enhance knowledge coordination among executives by constraining ECG. The performance consequence of such a positive relationship between KCN and ECG within TMT should be explored further in the near future.