Date of Award

Summer 6-2020

Document Type

Dissertation

Degree Name

Doctor of Philosophy (PhD)

Department

Finance

Program/Concentration

Business Administration -- Finance

Committee Director

John A. Doukas

Committee Member

Mohammad Najand

Committee Member

David D. Selover

Abstract

Scholarly studies have focused on the impact of managerial characteristics on various corporate activities. Following this stream of literature, this dissertation empirically examines the potential effects of three major Chief Executive Officer (CEO) characteristics, i.e., CEO ability, CEO risk taking behavior induced by compensation structure, and CEO overconfidence on corporate bankruptcies. Essay 1 examines whether chief executive officers (CEOs) are to be blamed for corporate failure. Using alternative measures of CEO ability, we document that high-ability CEOs are less likely to be associated bankruptcy. Bankruptcy-related high-ability CEOs manage to salvage their post-bankruptcy careers either with the reorganized firms or with other firms experiencing financial difficulties. We document that such CEOs improve the financial performance of the firms they manage during post-bankruptcy career. Jointly, our evidence points out that the incidence of corporate bankruptcy is unrelated to high-ability managers and that it does not have adverse effects on their post- bankruptcy careers.

This study examines whether risk preference inducing CEO compensation structure is associated with corporate bankruptcy. Specifically, using CEO inside debt (i.e., pensions and deferred compensation) and the sensitivity of CEO wealth to stock price (i.e., high CEO delta) as proxies for CEO risk aversion, and the sensitivity of CEO wealth to stock return volatility (i.e., high CEO vega) as a proxy for CEO risk-seeking behavior, we document that CEO compensation structure may mitigate/exacerbate corporate bankruptcy.

This study examines whether risk preference inducing CEO compensation structure is associated with corporate bankruptcy. Specifically, using CEO inside debt (i.e., pensions and deferred compensation) and the sensitivity of CEO wealth to stock price (i.e., high CEO delta) as proxies for CEO risk aversion, and the sensitivity of CEO wealth to stock return volatility (i.e., high CEO vega) as a proxy for CEO risk-seeking behavior, we document that CEO compensation structure may mitigate/exacerbate corporate bankruptcy.

DOI

10.25777/fjze-ys98

ISBN

9798678107817

ORCID

0000-0002-4158-0625

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