46 Pages Posted: 16 Jun 2010 Last revised: 4 Aug 2015
Date Written: July 31, 2015
I examine the role of geography in the market for CEOs and find that firms hire locally five times more often than expected if geography were irrelevant to the matching process. This local matching bias is widespread and exists even among the largest U.S. firms. Tests reveal that both labor supply and demand influence local matching. Compensation and unforced turnover are lower for local than for non-local CEOs, and unlike non-local CEOs, the compensation of locals depends on local labor market factors. These findings suggest the presence of market segmentation and contrast with much of the prior literature which explicitly or implicitly assumes a single national market.
Keywords: CEO, geography, corporate finance
JEL Classification: G30, G34
Suggested Citation: Suggested Citation