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Do Local Managers Give Labor an Edge?

Scott E. Yonker

Cornell University - Dyson School of Applied Economics and Management

December 23, 2013

Based on the psychological theory of place attachments, native local managers should be more rooted in their communities than non-locals and should act accordingly. Consistent with this, local managers are 33% less likely to lay off employees than their non-local industry peers following industry distress. Locals finance higher employment by spending cash, cutting investment, and selling assets. While there is no direct evidence that these labor-friendly policies impact firm performance or value, only locals with weaker incentives implement these policies, suggesting that favoritism by locals may be suboptimal. Taken together these results suggest that managerial preferences impact corporate employment decisions.

Number of Pages in PDF File: 50

Keywords: behavioral finance, managerial preferences, labor, place attachment

JEL Classification: G02, G30, J50

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Date posted: February 16, 2013 ; Last revised: May 14, 2014

Suggested Citation

Yonker, Scott E., Do Local Managers Give Labor an Edge? (December 23, 2013). Available at SSRN: http://ssrn.com/abstract=2218824 or http://dx.doi.org/10.2139/ssrn.2218824

Contact Information

Scott E. Yonker (Contact Author)
Cornell University - Dyson School of Applied Economics and Management ( email )
Ithaca, NY
United States
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