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Executive compensation and corporate bankruptcy in the context of crisis

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  • Sarra Elleuch Hamza
  • Imen Lourimi

Abstract

This paper investigates the relationship between executive compensation and bankruptcy in the context of crisis. Selecting a sample of the 105 largest bankrupt US companies and the 105 largest solvent US companies for the periods 2000 to 2002 and 2007 to 2009, and using multivariate logit regressions, our results reveal a negative and significant relationship between CEO compensation and corporate bankruptcy two years prior to the occurrence of this event. In addition, the results show that the compensation levels received by CEOs in failed companies are not significantly different from those paid to its counterparts in healthy companies for a three-year period prior to the bankruptcy. This study suggests that, unlike many previous studies, CEO compensation is reduced when the firm is near bankruptcy. It supports the recent trend of a decrease in managerial power and the active role of creditors in fixing CEO remuneration.

Suggested Citation

  • Sarra Elleuch Hamza & Imen Lourimi, 2014. "Executive compensation and corporate bankruptcy in the context of crisis," International Journal of Business Governance and Ethics, Inderscience Enterprises Ltd, vol. 9(1), pages 68-90.
    • Handle: RePEc:ids:ijbget:v:9:y:2014:i:1:p:68-90
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    Cited by:

    1. Saleh F. A. Khatib & Hamzeh Al Amosh & Husam Ananzeh, 2023. "Board Compensation in Financial Sectors: A Systematic Review of Twenty-Four Years of Research," IJFS, MDPI, vol. 11(3), pages 1-22, July.

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