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NATIONAL BUREAU OF ECONOMIC RESEARCH

NBER Working Papers by Julien Sauvagnat

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Working Papers

May 2013CEO Pay and Firm Size: an Update after the Crisis
with Xavier Gabaix, Augustin Landier: w19078
In the "size of stakes" view quantitatively formalized in Gabaix and Landier (2008), CEO compensation is determined in a competitive talent market, and reflects the size of firms affected by talent. This paper offers an empirical update on this view. The years 2004-2011, which include the recent crisis, were not part of the initial study and offer a laboratory to examine the theory as they include new positive and negative shocks to the size of large firms. Executive compensation at the top (ex ante) did closely track the evolution of average firm value during those years. During the crisis (2007 - 2009), average total firm value decreased by 17%, and CEO pay decreased by 28%. During 2009-2011, we observe a rebound of firm value by 19% and of CEO pay increased by 22%. These fairly proporti...

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