HCBE Faculty Articles
Title
Do Golden Parachutes Matter? Evidence from Firms that Ultimately Filed for Bankruptcy
Document Type
Article
Publication Date
2018
Publication Title
The Quarterly Review of Economics and Finance
ISSN or ISBN
1062-9769
Volume
67
First Page
63
Last Page
78
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
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
