Bankrupt Firms By Vidhan K Goyaly and Wei Wang Discussant Jiang Cheng Shanghai Jiao Tong University 2012 NTUICF Meeting Taipei Findings Creditor control of bankruptcies increases ID: 500733
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Provision of Management Incentives in Bankrupt FirmsBy Vidhan K. Goyaly, and Wei Wang
Discussant: Jiang Cheng
Shanghai Jiao Tong University
2012
NTUICF
Meeting, TaipeiSlide2
FindingsCreditor control of bankruptcies increases the likelihood that bankrupt firms offer retention and incentive bonuses to managers.Key employee retention plans (KERPs)
improve bankruptcy
outcomes for creditors along several dimensions:
higher likelihood
of emergence,
reduced
bankruptcy duration,
fewer
violations
of the
absolute priority rule.Slide3
CommentsIVs for the adoption of KERPs on page 24: Employment options for employees. The propensity of employees to switch firms depends on the ease with which they can find alternative employment. page17Two proxies measured by a geographic concentration of same-industry firms ThickEmplMarkets and the median industry cash compensation growth IndCompGrowth)
Reasonable
proxy for
lower level managers, not
perfect for
the
highest-tier group
managers.
Proxy
for top managers’ quality/employment options. Firms go bankruptcy mainly because of top managers, not low lever managers. They are not superior
managers. They are truly entrenched
managers,
or just have bad luck
?
KERPs are adopted because creditors are ineffective in preventing (top) managers/CEOs from enriching themselves through the payment of these bonuses or creditors believe incumbent CEOs are
those with
bad
luck only?Slide4
CommentsSample period 1996-2007. Any difference between pre-2005 and post-2005 since the passage of BAPCPA?Page 21: ThickEmplMarkets positively affect the plan sizes and plan costs for the payment of retention bonuses but not for incentive bonuses. On the contrary, IndCompGrowth
positively affect plan sizes and plan costs for incentive bonuses but not for incentive retention bonuses. Any explanation?
Typo: Wooldridge
(2002) instead of
Woolridge
(2002) on page 25