CEO Pay and Firm Size: An Update after the Crisis

20 Pages Posted: 25 Feb 2014

See all articles by Xavier Gabaix

Xavier Gabaix

Harvard University - Department of Economics; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI)

Augustin Landier

HEC

Julien Sauvagnat

Bocconi University; Bocconi University - IGIER - Innocenzo Gasparini Institute for Economic Research

Multiple version iconThere are 3 versions of this paper

Date Written: February 2014

Abstract

In the ‘size of stakes’ view quantitatively formalised in Gabaix and Landier (Quarterly Journal of Economics, 121(1):49–100, 2008), CEO compensation reflects the size of firms affected by talent in a competitive market. The years 2004–11 were not part of the initial study and offer a laboratory to examine the theory with new positive and negative shocks. Executive compensation (measured ex ante) did closely track the evolution of average firm value, supporting the ‘size of stakes’ view out of sample. During 2007–9, firm value decreased by 17%, and CEO pay by 28%. During 2009–11, firm value increased by 19% and CEO pay by 22%.

Suggested Citation

Gabaix, Xavier and Landier, Augustin and Sauvagnat, Julien, CEO Pay and Firm Size: An Update after the Crisis (February 2014). The Economic Journal, Vol. 124, Issue 574, pp. F40-F59, 2014. Available at SSRN: https://ssrn.com/abstract=2400783 or http://dx.doi.org/10.1111/ecoj.12084

Xavier Gabaix (Contact Author)

Harvard University - Department of Economics ( email )

Littauer Center
Cambridge, MA 02138
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
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Centre for Economic Policy Research (CEPR)

London
United Kingdom

European Corporate Governance Institute (ECGI)

c/o ECARES ULB CP 114
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Belgium

Augustin Landier

HEC ( email )

France
+33630006051 (Phone)

HOME PAGE: http://https://sites.google.com/site/augustinlandier/

Julien Sauvagnat

Bocconi University ( email )

Via Sarfatti, 25
Milan, MI 20136
Italy

Bocconi University - IGIER - Innocenzo Gasparini Institute for Economic Research ( email )

Via Roentgen 1
Milan, 20136
Italy

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