Abstract
I develop a simple competitive equilibrium model and derive the prediction that CEO pay-size elasticity increases when more firms compete for an inelastic supply of managers. Using industry-level IPO waves as a proxy for increased competition for CEOs, I find that pay-size elasticity increases by 5.9% with a one standard deviation increase in IPO activity. This effect is stronger in more specialized industries. In addition, increased IPO activity leads to a greater likelihood of executive transitions between firms. The findings indicate that market forces play a key role in the determination of CEO pay.
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