Provision of Management Incentives in Bankrupt Firms

Vidhan Goyal and Wei Wang

Journal of Law, Finance, and Accounting, 2017, vol. 2, issue 1, 87-123

Abstract: This paper examines the use of key employee retention and incentive plans (KERPs) in bankrupt firms. We show that KERPs are more likely in Chapter 11 firms with complex operations and claim structures, strong creditor control, and located in thicker employment markets. Newly hired turnaround specialists are more likely to be covered by KERPs than incumbent CEOs. Objectives set by incentive plans are strongly linked to the probability of emergence. Our results suggest that KERPs are an efficient contracting solution to the problem of retaining and incentivizing key employees in bankruptcy.

Keywords: Key employee retention plans; Incentive contract; Chapter 11; Compensation; Retention bonuses; Creditor control; Human capital (search for similar items in EconPapers)
JEL-codes: G33 K22 M52 M54 (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (10)

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Persistent link: https://EconPapers.repec.org/RePEc:now:jnllfa:108.00000012

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