This paper updates Kaplan (1989) by comparing Federated Department Stores' value before its purchase by Campeau Corporation to its post-bankruptcy value. The post-bankruptcy value includes all direct and indirect costs of bankruptcy and financial distress. Federated's assets increased in value by 3.1 billion in 1992 dollars(or 1.6 billion in 1987 dollars). This increase is only slightly below that in Kaplan (1989), suggesting that net bankruptcy costs were modest, and, possibly, nonexistent. The Federated purchase illustrates that a highly-leveraged transaction can increase value, but still be unable to meet its debt obligations; and bankruptcy (and financial distress) need not be costly.

This paper studies top executive turnover and compensation, and their relation to firm performance in the largest Japanese and U.S. companies. Japanese executive turnover and compensation are related to earnings, stock returns, and performance measures. The fortunes of Japanese top executives, therefore, are positively correlated with stock performance and current cash flows (or with factors contributing to such performance). The relations for the Japanese executives are generally economically and statistically similar to those for their U.S. counterparts. There is some evidence, however, that the fortunes of Japanese executives are more sensitive to low income but less sensitive to stock returns than those of U.S. executives. Copyright 1994 by University of Chicago Press.

This paper studies top executive turnover and compensation, and their relation to firm performance in the largest Japanese and U.S. companies. Japanese executive turnover and compensation are related to earnings, stock returns, and, to a lesser extent, sales performance measures. The fortunes of Japanese top executives, therefore, are positively correlated with stock performance and current cash flows (or with factors contributing to such performance). The relations for the Japanese executives are generally economically and statistically similar to those for their U.S. counterparts. There is some evidence, however, that the fortunes of Japanese executives are more sensitive to low income but less sensitive to stock returns than those of U.S. executives.

This paper investigates the determinants of appointments of outsiders — directors previously employed by banks (bank directors) or by other nonfinancial firms (corporate directors) — to the boards of large nonfinancial Japanese corporations. Such appointments increase with poor stock performance; those of bank directors also increase with earnings losses. Turnover of incumbent top executives increases substantially in the year of both types of outside appointments. We perform a similar analysis for outside appointments in large U.S. firms and find different patterns. We conclude that banks and corporate shareholders play an important monitoring and disciplinary role in Japan.