Abstract: Executive′s pay-gap is one of the most important incentive mechanisms in the corporate governance framework. This paper analyzes the influence path among executive′s pay-gap, strategic innovation and firm performance, with the firm behavior theoretical framework, and the moderating effect of managerial power. This paper finds that with the increase of executive′s pay-gap, managers will exercise higher degree strategic innovation; strategic innovation behavior will directly influence firm performance; managerial power has positively moderating effect on the relation above. Those conclusions helps to explain the mechanism in the black-box of executive pay-gap, and helps to understand the influence of managerial power on the relationship between executive incentive mechanism and strategic change.

Key words: fund industry;executive officers, pay-gap, strategic innovation, managerial power