When the Congress Says “ PIP Your KERP ” : Performance Incentive Plans , Key Employee Retention Plans and , Chapter 11 Bankruptcy Resolution
نویسندگان
چکیده
Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA) imposed stringent requirements on Key Employee Retention Plan (KERP) adoptions and implicitly favored Performance Incentive Plans (PIPs) in the amended Chapter 11. We use court documents to differentiate between retention versus performance incentive plans, and examine their impact on bankruptcy resolution before and after BAPCPA. We find that PIPs effectiveness in reducing bankruptcy duration and improving operating performance post-Chapter 11 disappears after BAPCPA. We also find that prereform KERPs are associated with longer bankruptcy proceedings and lower operating performance. Our findings are consistent with the presence of regulatory arbitrage post-BAPCPA. (100 words) JEL classification: G33, K22
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