【Topic】Provision of Management Incentives in Bankrupt Firms

【Speaker】Vidhan K. Goyal，Professor, Hong Kong University of Science and Technology

【Time】13:45—15:15, 2013-10-31，Thursday

【Venue】Room 501, Weilun Building, Tsinghua SEM.

【Language】English

【Organizer】Department of Finance

【Target Audience】Faculty Members and Graduate Students

【Background Information】

Vidhan K. Goyal is a Professor of Finance at Hong Kong University of Science and Technology (since July 2008). He graduated from University of Pittsburgh in 1995(Ph.D). His research interests are Capital Structure, Debt Contracts, Corporate Governance, Mergers and Acquisitions, Corporate Restructuring. He got Citation of Excellence Award for 2013 (Given to the 50 most outstanding articles published by the top 300 management journals in the world).

【Abstract】

We examine the use of key employee retention plans (KERPs) in bankrupt Firms in Chapter 11 bankruptcy are more likely to offer retention and incentive bonuses to managers when creditors have greater control and when there is a greater risk of employee turnover. Incentives provided under such plans improve bankruptcy outcomes along several dimensions: they increase the likelihood of emergence, re- duce bankruptcy duration, and result in fewer violations of the absolute priority rule. We find no support for the view that KERPs enrich managers at the expense of other stakeholders. Instead, they appear to be an efficient contracting solution to the problem of retaining and incentivizing key employees in bankruptcy.