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How do executive pay and its gap with employee pay influence corporate performance? Evidence from Thailand tourism listed companies

Laurence Ferry (Business School, Durham University, Durham, UK)
Guanming He (Business School, Durham University, Durham, UK)
Chang Yang (Business School, Durham University, Durham, UK)

Journal of Hospitality and Tourism Insights

ISSN: 2514-9792

Article publication date: 20 July 2021

Issue publication date: 20 January 2023

509

Abstract

Purpose

The authors investigate how executive pay and its gap with employee pay influence the performance of Thailand tourism listed companies.

Design/methodology/approach

The authors manually collect data on the executives' and employees' remunerations for Thailand tourism listed companies and use the data for the authors’ OLS regression analysis. To check the robustness of the results to potential endogeneity issues, the authors employ the two-stage least-squares regression analysis and the impact threshold for a confounding variable approach.

Findings

The authors find that short-term executive compensation enhances firm performance, and that long-term executive compensation reduces the likelihood of unfavorable corporate performance. The authors also find that the gap in short-term pay between executives and employees has an inverted-U relation with firm performance.

Research limitations/implications

This study suggests that higher executive pay relative to employee pay could encourage executives to work hard to improve corporate performance, but that too large a pay gap between executives and employees could impair employees' morale and harm firm performance.

Practical implications

It is important for tourism companies to not only pay executives well but also avoid too large a pay gap between executives and employees.

Social implications

This study implies the important role of compensation design in contributing to employee engagement and good performance for tourism firms.

Originality/value

This study sheds light on agency problems between executives and employees in tourism companies and provides new evidence and insights on compensation research in the tourism sector in emerging markets.

Keywords

Acknowledgements

The authors thank the editor (Fevzi Okumus), an anonymous associate editor, and two anonymous reviewers for their constructive comments, which help them improve the paper substantively. Correspondence about the paper can be addressed to Guanming He and Chang Yang. This research received no specific grant from any funding agency in the public, commercial, or not-for-profit sectors.

Conflict of interests: None. All errors remain our own.

Citation

Ferry, L., He, G. and Yang, C. (2023), "How do executive pay and its gap with employee pay influence corporate performance? Evidence from Thailand tourism listed companies", Journal of Hospitality and Tourism Insights, Vol. 6 No. 1, pp. 362-381. https://doi.org/10.1108/JHTI-03-2021-0061

Publisher

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Emerald Publishing Limited

Copyright © 2021, Emerald Publishing Limited

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