It does whatever it wants to. If it has the power to plane travel it may escape on it's own. Otherwise it may be stranded an revel at the oportunity to do mayhem. If it has the ability to change shape it may simply settle down and run a gang of it's own.
Planar Binding ends after a period of 1 day/level of the caster if the creature is unable to complete its task.
I would say that as the caster is dead, and the demon would therefore be unable to complete a task for said caster, that the demon would basically be free to do whatever it wishes until the spell runs out.