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Pay disparity within top management teams, real earnings management, and firm value: destructive competition or value creation? A moderated mediating model

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  • Wei He
  • Xuanyi Shi
  • Yue Chang
  • Wenjun Wu

Abstract

This article examines the impact of pay disparity within the top management team (TMT) on real earnings management. Using data from Chinese listed firms for the period 2007 to 2018, we find that pay disparity within TMT has a negative impact on real earnings management and this relationship further enhances firms’ value, which supports internal governance view. Moreover, the indirect effect is stronger when product market competition is high. Results hold for both accounting and market firm value measures.

Suggested Citation

  • Wei He & Xuanyi Shi & Yue Chang & Wenjun Wu, 2022. "Pay disparity within top management teams, real earnings management, and firm value: destructive competition or value creation? A moderated mediating model," Applied Economics Letters, Taylor & Francis Journals, vol. 29(5), pages 384-390, March.
    • Handle: RePEc:taf:apeclt:v:29:y:2022:i:5:p:384-390
    DOI: 10.1080/13504851.2020.1869156
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