Do Managers Give Hometown Labor an Edge?
Scott E. Yonker
Cornell University - Dyson School of Applied Economics and Management
August 31, 2016
Based on the psychological theory of place attachments, managers will favor hometown workers over others. Consistent with this, following periods of industry distress, establishments located near CEOs’ childhood homes see fewer employment and pay reductions and are less likely to be divested relative to other establishments within ﬁrms. While there is no direct evidence that this employment bias destroys ﬁrm value, managers only implement these policies when governance is weak, suggesting that this favoritism is suboptimal. Taken together these results show that managerial preferences impact corporate employment decisions.
Number of Pages in PDF File: 32
Keywords: behavioral finance, managerial preferences, labor, place attachment
JEL Classification: G02, G30, J50
Date posted: February 16, 2013 ; Last revised: September 2, 2016