Inside Debt and Recoveries in Bankruptcy

60 Pages Posted: 11 Apr 2016 Last revised: 2 Jul 2016

See all articles by Andrea Pawliczek

Andrea Pawliczek

University of Missouri at Columbia - School of Accountancy

Date Written: June 13, 2016

Abstract

I examine the theoretical prediction that executive inside debt results in higher recoveries in bankruptcy. Using a sample of bankrupt firms, I find that supplemental executive retirement plans are positively associated with recoveries to unsecured debt in bankruptcy. Firms where CEOs have inside debt at the sample mean experience $0.053 greater recoveries per dollar of debt in the event of bankruptcy relative to firms where the CEO does not have inside debt. Consistent with theory, I also document that inside debt is positively related to efforts to preserve liquidity as bankruptcy approaches (e.g., cuts to R&D expenditures).

Keywords: Inside Debt, Bankruptcy, Pensions, Deferred Compensation, Executive Compensation

JEL Classification: G33, J33

Suggested Citation

Pawliczek, Andrea, Inside Debt and Recoveries in Bankruptcy (June 13, 2016). Available at SSRN: https://ssrn.com/abstract=2760622 or http://dx.doi.org/10.2139/ssrn.2760622

Andrea Pawliczek (Contact Author)

University of Missouri at Columbia - School of Accountancy ( email )

420 Cornell Hall
Columbia, MO 65211
United States

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