Do the initial job market conditions really matter for CEO pay?
This paper complements the literature on CEO compensation by studying the effects of job market conditions at the start of future CEOs' careers. We also contribute to research on cohort eff ects in compensation by taking a closer look at the niche job market for executives. Evidence from other labor market research points to procyclical cohort eff ects, positing that favorable initial conditions positively a ffect careers in the long run. We fi nd, however, no evidence of persistent rewards for US public fi rms' CEOs for starting their career in more successful fi rms, or for the luck of entering the job market in a good economy. In a setting with future public-fi rm CEOs and taking account of macroeconomic conditions at the start of their careers, our findings rather suggest that long-term e ffects are countercyclical: those individuals who start their careers in a recession, earn a higher CEO pay. We also find that initial job conditions may yield a higher first CEO compensation but the positive eff ect dissipates over time. The findings support the notion that the market for CEOs is e fficient.