Top Managerial Prestige and Organizational Bankruptcy

Abstract

This paper extends earlier work on an alternative view of bankruptcy suggesting that bankruptcy occurs when creditors withdraw then support from a firm's top management team. It further proposes that support for the top team depends upon the team's prestige. Five characteristics measuring the relative status of top teams were tested for their association with bankruptcy. Three of the characteristics focused on items commonly associated with membership in economic elites elite educational backgrounds, board memberships, and previous employment as officers in other corporations. The fourth and fifth characteristics focused on membership in political and military elites. The results indicated that political and board connections were negatively associated with bankruptcy in the year of failure, even when financial factors and cooptive board linkages were controlled. The results also showed that failing firms attempted to improve their managerial prestige three to four years before they failed. They were, however, unable to hold onto their gains because of the “bailout” by prestigious managers in the last two years before bankruptcy.

Stock market reaction to CEO certification: the signaling role of CEO background

“…Status defined in this way becomes a signal of quality, in that highly sought after individuals having numerous external directorships are perceived as having higher status. The number of external directorships can be indicative of a CEO's reputation or prestige in the managerial labor market (Certo, 2003;D'Aveni, 1990;Davis and Mizruchi, 1999;Lester et al, 2006) since companies invite CEOs with more valuable human capital and social capital to serve as their outside directors (Brickley, Linck, and Coles, 1999).…”

“…CEO external directorships. CEO external directorships refer to the number of external boards of directors (other than the focal firm's board) on which a CEO is serving (Certo et al, 2001;D'Aveni, 1990;Zhang, 2008).…”

The Art of Representation: How Audience-specific Reputations Affect Success in the Contemporary Art Field

“…Researchers examining various contexts, ranging from product and service markets (Diekmann, Jann, Przepiorka, & Wehrli, 2014;Rindova, Williamson, Petkova, & Sever, 2005) to corporate financing (Carter, Dark, & Singh, 1998;D'Aveni, 1990), stock markets (Pfarrer, Pollock, & Rindova, 2010), entrepreneurial efforts (Pollock & Gulati, 2007;Shane & Cable, 2002), and cultural industries (Delmestri, Montanari, & Usai, 2005;Ebbers & Wijnberg, 2012), have shown that reputation is a valuable intangible asset that increases reputation holders' success (Raub & Weesie, 1990;Shapiro, 1983). Most of this research operates under the assumption that actors have a single overall reputation and, furthermore, that reputation holders interact with an audience with homogenous concerns (Fombrun, 1996;Fombrun & Shanley, 1990;Fombrun & Van Riel, 1997).…”

Researching Entrepreneurial Failures

“…Although failure can have positive consequences for the individual (e.g., learning and personal growth [Cope, 2011;McGrath, 1999;), others often do not see entrepreneurial failure in such an optimistic light (D'Aveni, 1990;Semadeni, Cannella, Fraser, and Lee, 2008;Sutton & Callahan, 1987). As noted by Shapira (1987, p. 1413), "society values risk taking, but not gambling, and what is meant by gambling is risk taking that turns out badly."…”