Do Golden Parachutes Matter? Evidence from Firms that Ultimately Filed for Bankruptcy

Author(s)

Pankaj K. Maskara, Nova Southeastern UniversityFollow
Laura S. Miller

Document Type

Article

Publication Title

The Quarterly Review of Economics and Finance

ISSN

1062-9769

Publication Date

2018

Abstract/Excerpt

We study bankruptcy outcomes of 275 firms and find that hiring CEOs with golden parachutes (GPs) during financial distress is associated with a lower probability of liquidation. In contrast, firms led by incumbent CEOs with GPs are more likely to be liquidated, as are firms led by new CEOs without GPs. Since GPs are nullified during bankruptcy, the observed relationship cannot be attributed to an explicit incentive effect. Rather, we contend that during financial distress GPs help recruit reputable CEOs who, even without explicit incentives, continue to maximize shareholder value due to implicit reputational and career concerns.

DOI

10.1016/j.qref.2017.05.002

Volume

67

First Page

63

Last Page

78

NSUWorks Citation

Maskara, Pankaj K. and Miller, Laura S., "Do Golden Parachutes Matter? Evidence from Firms that Ultimately Filed for Bankruptcy" (2018). HCBE Faculty Articles. 830.
https://nsuworks.nova.edu/hcbe_facarticles/830