Abstract
This paper provides large-sample evidence on CEO compensation changes, turnover and corporate performance following cash auction bankruptcy in Sweden. Mandatory bankruptcy auctions appear to impose substantial costs on top level managers: the median loss of CEO compensation is 40% over the two years following auction bankruptcy filing and the CEO turnover rate during bankruptcy is 64%. While CEO personal wealth effects and turnover are dramatic, the operating profitability of the auctioned firms is, however, typically at par with industry norms. Thus, there is no support in this paper for the hypothesis that managers in a cash auction bankruptcy system tend to file "too late". In comparison, extant evidence on the U.S. bankruptcy code (in particular Hotchkiss (1995)), which permits managers to maintain control of the firm during Chapter 11 reorganization proceedings, indicates much lower CEO turnover rate (33%) and poorer operating performance by bankrupt firms relative to their industry competitors.