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TMT pay dispersion and firm performance: the moderating role of organizational governance effectiveness

Published online by Cambridge University Press:  10 February 2015

Gregorio Sanchez-Marin  and
J. Samuel Baixauli-Soler
Gregorio Sanchez-Marin*
Affiliation:
Department of Management and Finance, University of Murcia, Murcia, Spain
J. Samuel Baixauli-Soler
Affiliation:
Department of Management and Finance, University of Murcia, Murcia, Spain
*
Corresponding author: [email protected]
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Abstract

This study supports tournament theory in relation to high levels of organizational hierarchies, indicating that the job complexity facing the top management team supposes that pay dispersion positively influences firm performance. Examining a sample of 709 firm-year observations of Spanish listed companies spanning the period 2004–2012, our results indicate that the association between firm performance and top management team pay dispersion is conditional on the effectiveness of corporate governance. High top management team pay dispersion is associated with better performance in owner-controlled firms, where more effective monitoring is exerted by the board of directors.

Keywords

compensation dispersiontop management teamtournament theorygovernance effectivenessfirm performance
Type
Research Article
Information
Journal of Management & Organization , Volume 21 , Issue 4 , July 2015 , pp. 436 - 459
Copyright
Copyright © Cambridge University Press and Australian and New Zealand Academy of Management 2015 

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