We study bankruptcy outcomes of 275 firms and find that hiring CEOs with golden parachutes (GPs) during financial distress is associated with a lower probability of liquidation. In contrast, firms led by incumbent CEOs with GPs are more likely to be liquidated, as are firms led by new CEOs...

Based on our study of the biggest corporate failures in history from Barings Bank to General Motors we contend that despite the seemingly varied reasons suggested by the media the underlying cause of corporate failures in majority of the cases was agency problem. The academic literature...