Abstract

http://ssrn.com/abstract=2138778
 
 

Citations (4)



 


 



How Costly Is Corporate Bankruptcy for the CEO?


B. Espen Eckbo


Tuck School of Business at Dartmouth; European Corporate Governance Institute (ECGI)

Karin S. Thorburn


Norwegian School of Economics; Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI)

Wei Wang


Queen's School of Business; HKUST

February 12, 2016

Journal of Financial Economics (JFE), Forthcoming

Abstract:     
We examine chief executive officer (CEO) career and compensation changes for large firms filing for Chapter 11. One-third of the incumbent CEOs maintain executive employment, and these CEOs experience a median compensation change of zero. However, incumbent CEOs leaving the executive labor market suffer a compensation loss with a median present value until age 65 of $7 million (five times pre-departure compensation). The likelihood of leaving decreases with profitability and CEO share ownership. Furthermore, creditor control rights during bankruptcy (through debtor-in-possession financing and large trade credits) are associated with CEO career change. Despite large equity losses (median $11 million for incumbents who stay until filing), the median incumbent does not reduce his stock ownership as the firm approaches bankruptcy.

Number of Pages in PDF File: 47

Keywords: labor market capital, personal bankruptcy costs, turnover, career change, CEO compensation, wealth loss

JEL Classification: G33, G34, M12


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Date posted: August 31, 2012 ; Last revised: February 12, 2016

Suggested Citation

Eckbo, B. Espen and Thorburn, Karin S. and Wang, Wei, How Costly Is Corporate Bankruptcy for the CEO? (February 12, 2016). Journal of Financial Economics (JFE), Forthcoming. Available at SSRN: http://ssrn.com/abstract=2138778 or http://dx.doi.org/10.2139/ssrn.2138778

Contact Information

B. Espen Eckbo (Contact Author)
Tuck School of Business at Dartmouth ( email )
Hanover, NH 03755
United States
603-646-3953 (Phone)
603-646-3805 (Fax)
HOME PAGE: http://www.tuck.dartmouth.edu/eckbo
European Corporate Governance Institute (ECGI)
c/o ECARES ULB CP 114
B-1050 Brussels
Belgium
Karin S. Thorburn
Norwegian School of Economics ( email )
Helleveien 30
N-5045 Bergen
Norway
+4755959283 (Phone)
HOME PAGE: http://www.nhh.no/cv/thorburn
Centre for Economic Policy Research (CEPR)
77 Bastwick Street
London, EC1V 3PZ
United Kingdom
European Corporate Governance Institute (ECGI)
c/o ECARES ULB CP 114
B-1050 Brussels
Belgium
HOME PAGE: http://www.ecgi.org
Wei Wang
Queen's School of Business ( email )
143 Union Street
Kingston, Ontario K7L 3N6
Canada

HKUST ( email )
Clearwater Bay
Kowloon
Hong Kong
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