Is an Outside Chair Always Better? The Role of Non-CEO Inside Chairs on Corporate Boards

Shawn Mobbs

The Financial Review, 2015, vol. 50, issue 4, 547-574

Abstract: Proponents of separating the CEO and chairman positions advocate having an outside chairperson, although having an inside chairperson can be valuable for some firms. I find inside chairs are more likely where firm-specific human capital is more important and, in these firms, inside chairs are associated with higher firm valuation and better operating performance. Furthermore, skilled inside chairs increase forced CEO turnover sensitivity to performance. The evidence suggests that certain inside chairs can be valuable when firm-specific information is important for monitoring and an outside chair may be costly.

Date: 2015
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