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