Auction Bankruptcy and the CEO

38 Pages Posted: 23 Jul 2000

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: June 13, 2000

Abstract

This paper provides some first evidence on CEO turnover, compensation and corporate performance following bankruptcy auctions, using small-firm data from Sweden. Auction bankruptcy imposes significant costs on CEOs: the median compensation loss is 40% over two years following filing, and two-thirds of CEOs lose their jobs through the auction. There is, however, little evidence that managers delay bankruptcy filing at the detriment of firms' going concern value. The post-bankruptcy operating performance of auctioned firms is typically at par with industry competitors. Overall, the results are consistent with the hypothesis that bankruptcy auctions tend to force turnover of inefficient CEOs. This contrasts with extant evidence on Chapter 11 reorganizations. compensation, post-bankruptcy performance

Keywords: Bankruptcy auctions, CEO turnover, executive

JEL Classification: G33, G34, K22

Suggested Citation

Thorburn, Karin S., Auction Bankruptcy and the CEO (June 13, 2000). Presented at Tuck-JFE Contemporary Corporate Governance Conference. Available at SSRN: https://ssrn.com/abstract=236039 or http://dx.doi.org/10.2139/ssrn.236039

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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