Evaluating the Effect of Top Management Attributes on the Probability of Default

A few studies have focussed on the relationship between the top management team and probability of firm default. This research aims to evaluate the effect of CEO and CFO attributes, as top management, on the firm's probability of default. The research adopts a quantitative research methodology, of 642 companies on the FTSE all Share index. The findings show that as remuneration and tenure increased the probability of default decreased. This research proposes a regression model that ascertains the causal effect of an increase in the tenure and compensation of the Top Management Team on the Probability of default of a firm over a 3-year period. The findings will have a direct implication on management tenure and remuneration for firms to reduce their probability of default. This research can be developed further by undertaking a time series analysis of the data to see how the changes over time would affect the relationships. Keywords: Top Management Team, Probability of Default, CEO, CFO, KMV