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Provision of Management Incentives in Provision of Management Incentives in

Provision of Management Incentives in - PowerPoint Presentation

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Provision of Management Incentives in - PPT Presentation

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

bonuses managers plan incentive managers bonuses incentive plan firms retention page top employment bankruptcy kerps creditors thickemplmarkets 2005 payment comments likelihood ceos

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Slide1

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