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

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