Bankruptcy Auctions: CEO Turnover, Compensation Changes and Firm Performance

36 Pages Posted: 28 Dec 1998

See all articles by Karin S. Thorburn

Karin S. Thorburn

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

Date Written: November 1998

Abstract

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

Thorburn, Karin S., Bankruptcy Auctions: CEO Turnover, Compensation Changes and Firm Performance (November 1998). Available at SSRN: https://ssrn.com/abstract=141473 or http://dx.doi.org/10.2139/ssrn.141473

Karin S. Thorburn (Contact Author)

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)

London
United Kingdom

European Corporate Governance Institute (ECGI)

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

HOME PAGE: http://www.ecgi.org

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