Pay Gap in Top Management Team and Diversification Operation

This paper explored the relations between pay gap in TMT and diversification operation. The results show that when large pay gap in TMT force CEOs to face more intense competition, they tend to appeal to diversification which can reduce the probability of being replaced. And in more diversified firm, large pay gaps may be ineffective because high accountability already promotes strong effort and tournament competition encourages sabotage among executives whose relationships are already strained and politicized.