Local CEOs Research Articles

CEO Locality and Employment Stickiness

AbstractWe explore whether CEOs’ hometown identity involves labour adjustment decisions. We document that local CEOs, with their hometown ties, reduce employment to a lesser degree following sales downturns than nonlocal CEOs. This finding suggests that local CEOs’ strong local attachments motivate them to prioritise employee interests and build good reputations, which create private benefits or reserve future career paths in their hometowns. Our findings are more pronounced in areas where local connections are highly valued, thus supporting our argument. We further find that the retention efforts of local CEOs are related to low future performance. We extend the cost stickiness literature by documenting that CEOs’ place attachment influences resource adjustment decisions, particularly regarding labour, which eventually influences subsequent performance.

CEOs' hometown connections and corporate risk-taking: Evidence from China

Using hand-collected data on CEOs' hometown connections in Chinese A-share listed companies from 2009 to 2020, we find that such connections with suppliers are negatively associated with corporate risk-taking, reflected by the risk-taking behavior of CEOs with personal preference and self-interest. It is also found that the negative relationship between CEO hometown connections and corporate risk-taking is more pronounced for firms with greater economic policy uncertainty, firms in a period of tight monetary policy, firms with fewer analysts following, and firms with local CEOs, male CEOs, or CEOs without holding shares.

Hometown CEOs and Pollution Emissions: Evidence from Chinese Listed Companies

Abstract This study examines the relationship between CEO locality and corporate pollution emissions for a sample of Chinese A-share listed firms from 2008 to 2020. When the CEO’s hometown is consistent with the province of firm registration, the local CEOs are more likely to take measures conducive to environmental protection, such as increasing environmental investment to reduce corporate pollution. The results are robust to alternative model specifications, endogeneity issues, sampling criteria, and variable definitions. We identify executive social relations and long-termism as two potential channels. Overall, our findings demonstrate the important role of CEO locality in reducing corporate pollution and fulfilling social responsibilities. JEL classification numbers: H23, M51, O17. Keywords: CEO locality, Environmental governance, Informal institution.

"Ain't Nothing Free": Earning an Education at the Houston Junior Market Steer Auction

"Ain't Nothing Free":Earning an Education at the Houston Junior Market Steer Auction Rebecca Scofield (bio) Click for larger view View full resolution The 1943 Grand Champion steer of the Houston Fat Stock Show and Livestock Exposition (now known as Houston Livestock Show and Rodeo). Lieutenant R. B. Tate (left) and Elton Barton are shown with the champion steer at the Houston Fat Stock Show. The steer was owned by Warren Barton of Sweetwater, Texas. From Fort Worth Star-Telegram Collection, AR406-6-1705, University of Texas at Arlington Libraries, Special Collections. [End Page 494] By the mid-2010s, attendees at the junior market steer auction at the annual Houston Livestock Show and Rodeo (HLSR) were greeted by the "Hall of Champions," a long processional of the remains of past champion steers, namely their hides displayed with matted photographs of the living steer and its young owner. For decades, young people ranging from ages eight to eighteen in 4-H or FFA (once an acronym for Future Farmers of America) have exhibited between 1,800 and 2,500 steers in front of a 75,000-person audience. Competing first in local fairs throughout Texas, these exhibitors are selected as local winners and potential state-wide champions. Each year, roughly 450 of them are selected to go to the champion auction the following morning. The HLSR has not staged an ordinary stock auction, however; it has instead been a space that, according to HLSR publicity, "reward[ed] young Texas 4-H and FFA students for their hard work year round."1 Like other charity auctions, bidders have vied for social status by buying high—far higher than market-value for these animals. By 2019, a Grand Champion stock raiser was guaranteed $75,000 and, if the auction went well, allowed to receive up to $85,000. (By comparison, at an average 4-H auction sellers might have received between $1,500 and $5,000 for a Grand Champion steer).2 [End Page 495] Over the past century, students who raised champion animals for agricultural clubs have committed a great deal of time to raising their animals. It has been standard for them to spend up to five hours with the animal before dawn and after dark feeding, bathing, grooming, and exercising them.3 The young stockmen and women who appeared in Houston's arena have been overwhelmingly White, scrubbed clean, and dressed in appropriate western attire. For decades, they have represented an idealized version of the state's agricultural past and many Texans' desired future. After the daylong auction, champion sellers kissed their animals goodbye. The animals underwent drug testing, were butchered, and given back to buyers as premium beef packages. Simultaneously, organizers in Houston worked hard to wall off the chaos of the holding pens and provide a comfortable viewing area. Spectators need a metal star-shaped badge to gain entry, thus limiting seating to serious buyers ready to bid hundreds of thousands of dollars. For their anticipated generosity, the Steer Auction Committee created a buyers' breakfast and ensured audience members were provided with complimentary alcoholic beverages by a predominately African American and Latinx waitstaff. Since the 1990s, the audience has routinely consisted of real estate moguls, local CEOs, and oil barons dressed in white cowboy hats and shiny boots, eager to support the educational dreams of young people. Funds beyond the award limit of $85,000 were funneled into the Educational Fund to be distributed among seven-hundred smaller scholarships—including scholarships through 4-H and FFA, as well as ones dedicated to "Metropolitan" and "Opportunity" students, increasing the number of beneficiaries of the program and flagging the organization's educational orientation and dedication to diversity. Founded with the goal of teaching young men (and later young women) better agricultural practices, the HLSR expanded in the mid-century to provide educational resources and saw exponential growth in scholarship donations in the early twenty-first century. Ultimately, the HLSR created a huge business out of providing funds for individuals to pursue an education. As of 2019, the show had committed more than $25 million to various scholarships, educational program grants, and graduate assistantships annually. This auction exemplified a...

Local gambling culture and corporate tax aggressiveness: A trait activation perspective on informal institutions

AbstractBased on the theory of new institutionalism and trait activation, we empirically evaluated the role of gambling culture on aggressive corporate taxation. A positive association was found between gambling culture and tax aggressiveness, the gambling culture increased the risk preferences of firm executives. The relationship was more pronounced in non‐state‐owned firms, firms with a high proportion of male executives, shortsighted executives, local CEOs, and those located in areas with less intense tax regulation and lower levels of Islamic faith. The findings enrich studies investigating the economic consequences of gambling culture and provide innovative ideas for external regulators to formulate anti‐avoidance measures.

The Fight Against Cop City

On Saturday, March 4, I arrived at Intrenchment Creek Park in DeKalb County, Georgia, for the first day of a week of action against a $90 million construction project undertaken by the Atlanta Police Foundation—a private entity, backed by local CEOs and political leaders, that advances police interests. The foundation wants to raze eighty-five acres of public forest to build the largest police training facility in the United States, complete with a firing range, a burn building, and a “kill house” designed to mimic urban combat scenarios. It also argues that the facility will boost morale among officers. The size and scale of the project, and the destruction and deforestation it will require, have led a growing number of activists, organizers, and community members to object to what they call “Cop City.” The campaign against Cop City is simultaneously a campaign to defend the Weelaunee Forest, the name used for the area by the Muscogee Creek people forcibly displaced by settlers from the land in the early 1800s before it became the site of the notorious Atlanta Prison Farm. These elements of the campaign—the histories on which it draws, what it’s fighting against and for, who it is bringing together, and how—have given it tremendous staying power despite extraordinary odds.

Visiting monks: Are nonlocal CEOs paid more?☆

Using data on listed firms in China from 2005 to 2016, we find that nonlocal CEOs receive higher compensation than their local peers. More importantly, firms with nonlocal CEOs have lower performance and valuation than those with local CEOs. Heterogeneity analysis indicate that the higher pay of nonlocal CEOs is more prominent for firms with weak external monitoring, for state-owned enterprises, and in regions with a low supply of local talent. Additionally, firms with nonlocal CEOs exhibit lower pay-performance sensitivity and higher managerial perks. Taken together, our evidence supports geography as grounds for CEOs to extract pay premium. It highlights the importance of institutions in understanding the role of geography.

Do local CEOs commit less fraud? Evidence from Chinese listed firms

ABSTRACT This paper investigates whether CEOs working near their birthplace (i.e. local CEOs) commit less fraud. Using data of Chinese listed firms, where local social network is important for business, we find that local CEOs are associated with less fraud commitment. Cross-sectional analyses show that the inhibitory effect is weakened when the CEOs have poverty or oversea experiences. Such impact is more pronounced when the firms are owned by non-state owners or have weaker internal control.

Liabilities of Foreignness in CEO Dismissals

While foreign-born individuals are being appointed to lead US corporations in record numbers, little is known about whether foreign CEOs are held to the same performance standards as local CEOs once in their role. To offer insights to this question, we analyze the incremental effect of CEO foreignness and firm performance on CEO dismissal. We draw on social identity and attribution theories to propose that, as firm performance declines, CEO foreignness will become more salient in the eyes of the board and foreign CEOs will be more likely to attract blame, increasing their likelihood of dismissal relative to local CEOs. Using a longitudinal sample of publicly traded US firms (n = 11,323 firm-year observations) and controlling for many factors including endogeneity, we find that the board of directors is more likely to dismiss a foreign CEO than a local CEO. Our findings suggest that although there has been a notable increase of foreigners at the helm of large firms, which would indicate that nationality matters less in the C-suite, boards of directors’ evaluations of these ‘elite migrants’ may still be subject to bias. We advance research on how liabilities of foreignness affect individual outcomes among corporate leadership in organizational settings and highlight the need for firms to take ameliorative steps to fully harness the benefits of international diversity in their top ranks.

The Triumph of Locality in Troubled Times: Local CEOS, Social Capital, and Credit Ratings Under Uncertainty

We emphasize the relevance of the management team's local knowledge in the presence of business uncertainty. Exploiting a hand-collected dataset covering CEOs' birthplace, we provide robust evidence that firms with local CEOs are more likely to have higher credit ratings and preserve their debt ratings in the presence of high business uncertainty. Firms with local CEOs are significantly more likely to neutralize the exogenous uncertainty shocks, partly through a more efficient use of social capital. The effects are notably relevant in the case of small and undiversified firms as well as those firms with more financial constraints or in the industries with higher market competition. Overall, our result highlight the usefulness of local knowledge.

East, West, Home's Best: Do Local CEOs Behave Less Myopically?

ABSTRACT We test whether CEOs working near their childhood homes are less likely than nonlocal CEOs to make myopic decisions. Place attachment theories suggest that people develop mutual caretaking relationships with their birthplaces. Also, executive labor markets face less information asymmetry about local CEOs, resulting in lower pressure on local CEOs for quick profits. Consistent with the prediction, we find that local CEOs are less likely to cut R&D expenditures for beating analyst forecasts or avoiding earnings decreases. In their last year of office, local CEOs are significantly less likely to cut R&D than nonlocal CEOs. The CEO locality effect is stronger when more local business interests are embedded in the firm and when the residents of the CEO's birth state have stronger local social bonds. Local CEOs' longer horizons are consistently manifested in their other decisions, such as paying more state tax and being more socially responsible in business operation. JEL Classifications: G10; G23; M40.

Managerial Ability and Firm Performance in Malaysia: Do Familiness and Foreignness of the CEOs Matter?

This study examines whether the relationship between managerial ability and firm performance is driven by familiness and foreignness of the CEOs. We divide the sample of CEOs according to their familiness and foreignness and estimate CEOs abilities via DEA and Tobit regression. We then employed dynamic GMM panel estimator to address the endogeneity issues. Based on a sample of 361 firms in Malaysia over 2011–2015, we documented empirical evidence that managerial ability of local CEOs with foreign working or education experience are most positively related to Tobin’s Q, followed by local CEOs without foreign experience. We further found that local CEOs contribute to firm performance only if they are not family connected with the firm. Last, our findings also suggest that the presence of foreign CEOs improve the firm performance when they are nonfamily CEOs originated from high management practice countries.

Local CEOs, Career Concerns, and Voluntary Disclosure

Local CEOs, Career Concerns, and Voluntary Disclosure

East, West, Home's Best: Are Local CEOs Less Myopic?

We test whether CEOs working near their childhood homes (i.e., local CEOs) are less likely than nonlocal CEOs to make myopic investment decisions. Place attachment theories suggest that people develop mutual caretaking relationships with their birthplaces. In addition, executive labor markets face less information asymmetry about local CEOs, resulting lower pressure on local CEOs for quick profits. Consistent with the prediction, we find that local CEOs are less likely to cut R&D expenditures for beating analyst forecasts or avoiding earnings decreases. These results are corroborated by the finding that in their last year of office local CEOs are significantly less likely to cut R&D than nonlocal CEOs. The CEO locality effect is stronger when more local business interests are embedded in the firm, i.e., when the firm’s business is more concentrated in the CEO’s birth state and the residents of the CEO’s birth state have a higher inclination to invest in local firms. The effect is also more significant when the residents of the CEO’s birth state have stronger local social bond, i.e., when the state has lower population mobility and more social capital. Local CEOs’ longer horizons are consistently manifested in their other decisions such as paying more state tax and being more socially responsible in business operation.

Renaissance and Retrenchment in the 1970s

Between World War II and 1970, Pittsburgh’s Democratic Party hand-selected the city’s mayors, with one exception: Pete Flaherty. After four years on City Council and a close relationship with Party leaders, Flaherty rejected first an invitation to be Mayor Joseph Barr’s designated successor, beholden to the Party for campaign money, and a subsequent attempt by Allegheny Conference on Community Development (ACCD) members to lure him onto the Republican ticket. He campaigned instead as an unendorsed, independent Democrat and beat the machine candidate in the Democratic primary; in the 1969 general election, he ran on the platform that he was “nobody’s boy.” He financed his campaign through donations, launched innovative billboard and newspaper advertising campaigns, and won handily. Four years later, after alienating the Democratic Party, organized labor, his predecessor, most of the City Council, the police, the firemen, local CEOs, African American leaders, and both of the city’s major newspapers, Flaherty ran unopposed for a second term, having secured both the Republican and Democratic nominations. The joke around town was that “nobody likes Pete except the voters.”1 Popular narratives of Pittsburgh’s urban development since 1945 most often characterize Flaherty’s 1970–1977 mayoral tenure as a temporary disruption of perpetual Renaissance and relentless progress. Flaherty was a passionate critic of the Renaissance’s top–down, corporateoriented approach to urban development and the distribution of public resources, and he set out

PROCESSES OF LOCALIZATION AND INSTITUTIONALIZATION OF LOCAL MANAGERS IN ECONOMIC FUNCTIONS IN DANISH OWNED SUBSIDIARIES IN ESTONIA, LATVIA AND LITHUANIA AROUND THE 21ST CENTURY

This study identifies interplay between the localization processes and formal as well as informal institutions in a specific context. Particularly the changes over time in institutions and localization processes are in focus. A longitudinal study of institutional changes in local management has been conducted from 1997 to 2002 among local CEOs, chief accountants and production managers in a Danish SME, using mainly qualitative methods. Data have been compared to primary data from similar companies in Estonia, Latvia and Lithuania. The study has resulted in establishing a model for comparing interplay between localization processes in SMEs and the formal and informal institutions in different transition and post‐transition economies.