How Non-CEO Inside Directors Add Value After an Unplanned CEO Exit

The CEO-firm match theory posits that the CEO labor market is efficient and competitive and that the matching between CEOs and firms is optimal. However, both anecdotal and empirical evidence show that CEO departures, particularly unplanned CEO departures, can be disruptive, create friction (i.e., costs associated with appointing a non-optimal CEO replacement), and significantly and negatively affect shareholder value. In a new paper, we demonstrate that the presence of non-CEO inside directors (NCIDs) can help firms reduce friction costs and improve performance during unplanned CEO transitions. Using a comprehensive, manually collected data set of unplanned CEO departures from 1993 to … Read more

IPO Pricing as a Function of your Investment Banks’ Past Mistakes: The Case of Facebook

On May 18, 2012 Facebook (FB) held its initial public offering (IPO) on NASDAQ, raising over $16 billion making it one of the largest IPOs in history. To the surprise of many investors, there was almost no underpricing, as the stock closed the first day of trading almost flat from its offer price. The IPO was described as not only disappointing but also detrimental to the broader market in the financial press. The “failed” FB IPO was blamed for causing everything from mutual funds’ declines in assets under management to significant increases in IPO underpricing, to subsequent canceled IPOs. We … Read more