Control benefits and CEO discipline in automatic bankruptcy auctions

• 成果类型: Article; Proceedings Paper
• 署名作者: Eckbo, BE; Thorburn, KS
• 署名单位: Dartmouth College
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/S0304-405X(03)00126-0
• 发表日期: 2003
• 页码: 227-258
• 关键词: bankruptcy; auctions; liquidation; Restructuring; Risk shifting; asset substitution; managerial conservatism; Executive compensation; ceo turnover; post-bankruptcy performance

摘要

Swedish bankruptcy filing automatically terminates the employment of the chief executive officer (CEO) and triggers an auction of the firm. Critics of this system warn of excessive shareholder risk-shifting incentives prior to filing. We argue that private benefits of control induce managerial conservatism that may override shareholder risk-shifting incentives. By investing conservatively, the CEO increases the joint probability that the auction results in a going-concern sale and that the CEO is rehired. This uniquely implies that the rehiring probability is increasing in private control benefits, which our empirical results support. We also find that buyers in the auction screen on CEO quality. Overall, labor market discipline is dramatic, as filing CEOs suffer large income losses relative to CEOs of matched, non-bankrupt firms, Finns emerging from auction bankruptcy appear healthy as they typically go on to perform at par with industry rivals. (C) 2003 Elsevier Science B.V. All rights reserved.