CEO Pay and Firm Size: An Update After the Crisis | Zendy

Gabaix Xavier | Zendy; Landier Augustin | Zendy; Sauvagnat Julien | Zendy

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CEO Pay and Firm Size: An Update After the Crisis

Author(s) -

Gabaix Xavier,

Landier Augustin,

Sauvagnat Julien

Publication year - 2014

Publication title -

the economic journal

Language(s) - English

Resource type - Journals

SCImago Journal Rank - 4.683

H-Index - 160

eISSN - 1468-0297

pISSN - 0013-0133

DOI - 10.1111/ecoj.12084

Subject(s) - executive compensation , ex ante , compensation (psychology) , value (mathematics) , enterprise value , economics , sample (material) , monetary economics , microeconomics , incentive , accounting , macroeconomics , statistics , psychology , chemistry , mathematics , chromatography , psychoanalysis

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%.

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