Born to behave: home CEOs and financial misconduct

Abstract

We examine the association between CEO birthplace proximity and financial misconduct. We find that CEOs managing firms near their birthplaces (“home CEOs”) are associated with lower levels of financial misconduct compared to non-home CEOs. This association is not attributable to differences in corporate governance. The relationship is stronger in areas with a strong local investment presence, higher levels of religious commitment, and among CEOs with longer tenures in their home state. Our findings are robust to addressing potential selection and omitted variable biases, as well as multiple robustness tests, including analyses of involuntary CEO changes and firm headquarters relocations. We also find a similar association for CFOs, with firms employing home CFOs exhibiting lower levels of financial misconduct.