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The Impact of CEO Duality and Prestige on a Bankrupt Organization

Erich N. Brockmann, James J. Hoffman, David D. Dawley and Charles J. Fornaciari
Journal of Managerial Issues
Vol. 16, No. 2 (Summer 2004), pp. 178-196
Stable URL: http://www.jstor.org/stable/40604453
Page Count: 19
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Since scans are not currently available to screen readers, please contact JSTOR User Support for access. We'll provide a PDF copy for your screen reader.
The Impact of CEO Duality and Prestige on a Bankrupt Organization
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Abstract

This study examines the darker side of organizational performance. That is, what happens after an organization files for bankruptcy protection? In particular, we focus on the influence of a Chief Executive Officer's (CEO) power, both formal and informal. Examining 252 major organizations that have filed for Chapter 11 bankruptcy protection, we found that formal power—duality—is associated with improved odds of survival and a reduced time until the organization returns to performance standards on par with the rest of its industry. However, duality is also associated with a longer time in Chapter 11 reorganization. Meanwhile, a CEO's informal power— prestige— is associated with reduced odds of survival, a longer time in Chapter 11 reorganization and longer recovery times. The results suggest that a CEO with formal power is needed for an organization to survive and return to performance standards but at the cost of remaining in reorganization for a longer period. Meanwhile, CEO prestige appears to have overall negative effects on postbankruptcy odds of survival, reorganization time and recovery time.

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