Can Non-CEO Inside Directors Add Value? Evidence from Unplanned CEO Turnovers

45 Pages Posted: 18 Apr 2016

Date Written: April 29, 2017

Abstract

A firm’s ability to quickly recover from setbacks is of great importance to its stakeholders and investors. Although critics argue that inside directors decrease the monitoring effectiveness of a board, inside directors arguably possess superior firm specific experience and knowledge. The main purpose of this paper is to investigate the roles of non-CEO inside directors using the context of CEO departures when immediate CEO succession planning is of great importance. Using a unique data set of 582 non-planned CEO departures from 1993 to 2012, we find evidence that firms with inside directors other than the CEO incur lower costs and have stronger performance after an unplanned CEO departure, especially when the firm hires an outsider as the new CEO.

Keywords: Corporate governance, CEO succession, CEO turnover, Board of directors

JEL Classification: 150, 180

Suggested Citation

Krigman, Laurie and Rivolta, Mia L., Can Non-CEO Inside Directors Add Value? Evidence from Unplanned CEO Turnovers (April 29, 2017). Available at SSRN: https://ssrn.com/abstract=2960222 or http://dx.doi.org/10.2139/ssrn.2764967

Laurie Krigman (Contact Author)

Babson College ( email )

Finance Division
321 Tomasso Hall
Babson Park, MA 02457-0310
United States
781-239-4246 (Phone)

Mia L. Rivolta

Xavier University ( email )

3800 Victory Pkwy
Cincinnati, OH 45207
United States

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