CEO Turnover, Financial Distress, and Contractual Innovations

CEO Turnover, Financial Distress, and Contractual Innovations

The design of CEO incentives is particularly important for firms in financial distress. We compare the resolution of CEO incentive problems in distressed firms between the 1980s versus the 1990s, focusing on how changes in contractual provisions, as well as in the executive labor market, resulted in...

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Veröffentlicht in:The Accounting review 2014-05, Vol.89 (3), p.959-990
Hauptverfasser: Evans, John Harry, Luo, Shuqing, Nagarajan, Nandu J.
Format: Artikel
Sprache:eng
Schlagworte:
Bargaining power
Chief executive officers
Comparative studies
Creditors
Direct sales
Electronics industry
Employee turnover
Equilibrium
Financial management
Financial performance
Incentives
Labor contracts
Labour turnover
Retail industries
Retail trade
Sales operations
Sales transactions
Skilled workers
Work incentives
Working capital
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Zusammenfassung:The design of CEO incentives is particularly important for firms in financial distress. We compare the resolution of CEO incentive problems in distressed firms between the 1980s versus the 1990s, focusing on how changes in contractual provisions, as well as in the executive labor market, resulted in a shift to a new equilibrium. Our analyses provide evidence that the increased bargaining power of creditors, together with changes in the use of contractual provisions in the 1990s, enabled creditors to more effectively retain highly skilled CEOs with firm-specific knowledge and provide them with incentives to improve firm performance.
ISSN:0001-4826
1558-7967
DOI:10.2308/accr-50688