Bankruptcy Auctions: CEO Turnover, Compensation Changes and Firm Performance
36 Pages Posted: 28 Dec 1998
Date Written: November 1998
This paper provides some first, large-sample evidence on CEO turnover, compensation changes and corporate performance following bankruptcy auctions, using data from Sweden. Two-thirds of CEOs lose their jobs through the auction, and the median compensation loss is 40% over the two years following filing. While CEO turnover and compensation effects are dramatic, post-bankruptcy operating performance of firms auctioned as going concerns is typically at par with industry competitors. Thus, there is little evidence of delayed filing at the detriment of the firm's going concern value. Overall, the results are consistent with the hypothesis that bankruptcy auctions force turnover of inefficient CEOs. These results contrast with extant evidence on Chapter 11 renegotiations.
JEL Classification: G3
Suggested Citation: Suggested Citation