East, West, Home’s Best: Are Local CEOs Less Myopic?
Shufang Lai
Department of Finance
Southern University of Science and Technology
No 1088, Xueyuan Rd., Nanshan District, Shenzhen, China 518055
laisf@sustc.edu.cn
Zengquan Li
School of Accountancy
Shanghai University of Finance and Economics
No.777 Guoding Road, Yangpu District, Shanghai, China 200433
zqli@mail.shufe.edu.cn
Yong George Yang*
School of Accountancy
The Chinese University of Hong Kong
No.12, Chak Cheung Street, Shatin, N.T., Hong Kong
yyong@cuhk.edu.hk
AR

Abstract
Place attachment theories suggest that people develop mutual caretaking relationships with
their birthplaces. We hence test whether CEOs working near their childhood homes (i.e., local
CEOs) are less likely than nonlocal CEOs to make myopic operating decisions. Our empirical
results show that local CEOs are less likely to cut R&D expenditure to avoid earnings decreases
or meet analyst consensus forecasts. Such effects are stronger when the firm’s operations involve
more local business interests, i.e., when the firm’s business is more concentrated in the state and
the state’s residents have a higher inclination to invest in local firms. The effects are also more
significant when the state’s residents have stronger local social bonds, i.e., when the state has
low population mobility and more social capital. In addition, local CEOs do not develop myopia
in their last years of office. In a broader setting of testing operational myopia, we find that local
CEOs pay more state tax (but not more federal tax) and perform better in corporate social
responsibility (CSR) in terms of protecting the environment, caring for their employees, and
contributing to their community.