Title: The Proximal and Distal Consequences of Overpayment: Contingent on Department Pay Transparency and Individual Performance Ranking

Speaker: Tingting Lang (Renmin Business School)

Time: 14:00 (Wednesday), December 17th, 2025

Venue: Room 1008, Mingde Business Building (Zhongguancun Campus)

Language：Chinese/ English

ABSTRACT:

The consequences of overpayment (i.e., compensation exceeding an employee’s reasonable market value) have been the subject of longstanding debate. While prior research documented conflicting findings on how overpayment impacts job outcomes, the specific proximal and distal behavioral responses, as well as the boundary conditions determining them, remain unclear. Integrating equity theory with a social comparison perspective, we propose that proximal and distal behavioral responses to overpayment depend on the visibility of compensation (pay transparency in the department) and the employee’s relative performance standing (individual performance ranking). Using a dataset of 25,441 faculties in US universities spanning 2004 to 2016, we find that under conditions of pay transparency, overpayment generally reduces individual turnover through a mechanism of decreased productivity. However, this mediation pathway differs between good and bad performers: for good performers, overpayment reduces turnover via decreased productivity, whereas for bad performers, it increases turnover via decreased productivity. Our study makes a key theoretical contribution by demonstrating how the interplay between information visibility and social comparison referents resolves the ambiguity surrounding the effects of overpayment.