Poor succession planning is wiping £2bn a year from the stock market value of FTSE 350 companies.

A report prepared by Investors in People analysed movements in share prices between May 2002 and May 2005 for companies that experienced at least one change in chief executive.

Companies with clear succession planning performed more than 7% better on the markets after the change than those that delayed appointing a replacement.

Over the course of the study, companies that delayed appointing a chief executive saw their share prices drop by 2.1% more than their peers.

Companies that promoted from within performed 11.7% better over the three years than those recruited from outside.

“Businesses need to have systems in place to ensure that they are prepared when senior managers leave – whether it is expected or not,” said Investors in People chief executive Ruth Spellman.