How Costly is Corporate Bankruptcy for Top Executives?

We examine CEO career and human capital changes around Chapter 11 bankruptcy filings for a large sample of publicly traded firms. One-third of the incumbent CEOs and half of all sample CEOs maintain full-time executive employment despite bankruptcy filing. For these CEOs, we estimate the median change in CEO human capital to be zero. CEOs who do not maintain full-time executive employment experience a median estimated loss of human capital equal to five times their pre-departure compensation. While CEO loss of equity investment in the bankrupt firm is large regardless of career changes, greater pre-filing equity holdings are associated with a lower likelihood of voluntary departure. Greater creditor control rights are associated with a higher likelihood of both forced departure and failure to maintain full-time executive employment.

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