The Double-Edged Sword of Retaining Non-CEO Inside Directors on the Board for a Firm’s R&D-Intensity

Purpose This paper aims to investigate the roles of non-CEO inside directors (NCIDs) in the new CEO-firm matching process using the context of unplanned CEO departures when immediate CEO succession planning becomes a sole board responsibility. Although critics argue that inside directors decrease the monitoring effectiveness of a board, inside directors arguably possess superior firm-specific experience and knowledge that can be beneficial during the leadership transition. Design/methodology/approach The authors use a comprehensive, manually collected data set of unplanned CEO departures from 1993 to 2012. Findings The authors find that NCIDs play an important role in the CEO transitioning process. They help firms identify qualified inside replacements and provide stability as the new permanent or interim CEO. In addition, NCIDs facilitate the transfer of information and help the new external CEOs succeed. They show that the longer the NCID stays with the company, the longer the tenure of the new CEO. They also document that the presence of NCIDs improves operating and stock performance; especially when the new CEO is hired from outside of the firm. Practical implications The impact of NCIDs is particularly important when the firm hires an outsider as the new CEO. These results suggest that board composition affects frictions in the CEO labor market. Originality/value The literature has predominantly focused on the downside of having inside directors. Too many inside directors on a firm’s board is often associated with ineffective boards and entrenchment. To the contrary, the authors focus on a potential benefit of having inside directors.

Download Full-text

Characteristics of Women and Men Corporate Inside Directors in the US

Corporate Governance An International Review ◽

10.1111/j.1467-8683.2004.00374.x ◽

2004 ◽

Vol 12 (3) ◽

pp. 337-342 ◽

Cited By ~ 84

Author(s):

Deborah Dahlen Zelechowski ◽

Diana Bilimoria

Keyword(s):

Inside Directors ◽

The Us

Download Full-text

Inside directors, risk aversion, and firm performance

Review of Financial Economics ◽

10.1016/j.rfe.2016.12.001 ◽

2017 ◽

Vol 32 ◽

pp. 64-74

Author(s):

Arun D. Upadhyay ◽

Rahul Bhargava ◽

Sheri Faircloth ◽

Hongchao Zeng

Keyword(s):

Firm Performance ◽

Risk Aversion ◽

Inside Directors

Download Full-text

Director workloads, attendance and firm performance

Accounting Research Journal ◽

10.1108/arj-02-2016-0023 ◽

2018 ◽

Vol 31 (2) ◽

pp. 214-231 ◽

Cited By ~ 5

Author(s):

Stephen Gray ◽

John Nowland

Keyword(s):

Firm Performance ◽

Empirical Analysis ◽

Design Methodology ◽

Archival Data ◽

Attendance Rates ◽

Content Type ◽

Inside Directors

Purpose This paper examines whether increased director workloads are benefiting firms or are causing directors to become too busy, resulting in lower director attendance and weaker firm performance. Design/methodology/approach This paper conducts empirical analysis of the relationships between meeting frequency, director attendance rates and firm performance using archival data from Australia. Findings Attendance rates for both outside and inside directors decrease as they are required to attend more meetings. The benefits firms obtain from holding additional meetings are significantly eroded by lower director attendance. Originality/value This study brings together the literatures on meeting frequency, director busyness and firm performance to show that increased director workloads are only beneficial to firms if directors do not become too busy to fulfill their obligations to shareholders.

Download Full-text

The Effect of Social Ties between Outside Directors and Inside Directors on Insider Trading and Earnings Management

korean management review ◽

10.17287/kmr.2016.45.5.1697 ◽

2016 ◽

Vol 45 (5) ◽

pp. 1697 ◽

Cited By ~ 1

Author(s):

Ju-Hyoung Park ◽

Ho-Young Lee ◽

Hae-Myung Shin

Keyword(s):

Earnings Management ◽

Insider Trading ◽

Social Ties ◽

Outside Directors ◽

Inside Directors

Download Full-text

Impact of gender and ethnic composition of South African boards of directors on intellectual capital performance

Corporate Board role duties and composition ◽

10.22495/cbv2i1art1 ◽

2006 ◽

Vol 2 (1) ◽

pp. 7-22 ◽

Cited By ~ 2

Author(s):

Mitchell Van der Zahn

Keyword(s):

Firm Performance ◽

South African ◽

Intellectual Capital ◽

Boards Of Directors ◽

Positive Association ◽

Positive Influence ◽

Ethnic Composition ◽

Inside Directors ◽

Negative Effect ◽

Using Data

This study examines the association between the gender and ethnic composition of boards of directors and firm performance in a transitional nation. In contrast to prior research that largely focuses on firm performance within a financial context, this study concentrates on intellectual capital performance. Using data collected from 84 South African, empirical results indicate a positive association between the percentage of female and non-white directors on the board and a firm’s intellectual capital performance. Additional analysis shows the designation of female directors as an insider has a negative effect of intellectual capital performance. Designation of female and non-white directors as outsiders, meanwhile, has a positive influence on a firm’s intellectual capital performance. Finally, there was no association between the percentage of non-white inside directors on the board and intellectual capital performance.

Download Full-text