Governance in Financial Distress and Bankruptcy

Family Business Survival and the Role of Boards

“…Prior corporate governance research generally has tended to focus only on board size and independent directors in listed corporations (Fich & Slezak, 2008). Other work has examined turnover of boards in listed firms already in distress and has noted both high exit rate and difficulties in recruiting new members with expertise to restructure the firm (Ayotte, Hotchkiss, & Thorburn, 2013). Our analysis extends these studies by showing that it is also important to consider what happens to board changes in averting bankruptcy and in a different context.…”

Stakeholder orientation and corporate payout policy: Insights from state legal shocks

“…To further explore the channels of the relationship between stakeholder orientation and share repurchases, we next examine whether cross-sectional variations in firm characteristics can alter the effects of statute enactment on share repurchases. Prior studies commonly argue that the conflicts of interest between shareholders and stakeholders often become exaggerated when firms are in financial distress or are close to default (Smith and Warner 1979;Cornell and Shapiro, 1987;Gilson et al, 1990;Gilson and Vetsuypens 1993;Ayotte et al, 2013, Chu, 20172018). 4 Thus, to resolve the conflict, we conjecture that the negative statue effect on share repurchases might be stronger for firms that are in financial distress or are close to default.…”

How costly is corporate bankruptcy for the CEO?

“…Some evidence exists on CEO compensation losses associated with Chapter 11 filings in the 1980s (Gilson, 1989;Gilson and Vetsuypens, 1993). However, over the past decades, Chapter 11 has evolved toward a more creditor-oriented process (Jiang et al, 2012;Ayotte et al, 2013), which by itself can impact CEO personal costs of corporate bankruptcy. In this paper, we provide large-sample evidence on CEO career and compensation changes in the modern era of Chapter 11.…”