Do Managers Give Hometown Labor an Edge?

35 Pages Posted: 16 Feb 2013 Last revised: 5 Jan 2017

Scott E. Yonker

Cornell University - Dyson School of Applied Economics and Management

Multiple version iconThere are 2 versions of this paper

Date Written: January 4, 2017

Abstract

Based on the psychological theory of place attachments, managers favor hometown workers over others. Consistent with this prediction, I find that 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. Together these results provide direct evidence of employee favoritism and show that the idiosyncratic styles of managers impact corporate employment decisions.

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

JEL Classification: G02, G30, J50

Suggested Citation

Yonker, Scott E., Do Managers Give Hometown Labor an Edge? (January 4, 2017). Available at SSRN: https://ssrn.com/abstract=2218824 or http://dx.doi.org/10.2139/ssrn.2218824

Scott E. Yonker (Contact Author)

Cornell University - Dyson School of Applied Economics and Management ( email )

Ithaca, NY
United States

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