Hometown Biased Acquisitions

73 Pages Posted: 22 Sep 2016 Last revised: 17 Jun 2018

See all articles by Feng Jiang

Feng Jiang

University at Buffalo - School of Management

Yiming Qian

University of Connecticut

Scott E. Yonker

Cornell University - SC Johnson College of Business

Date Written: June 10, 2018


We show that CEOs exhibit a hometown bias in acquisitions. Firms are over twice as likely to acquire targets located in the states of their CEOs’ childhood homes than similar targets domiciled elsewhere. Small, private home-state deals underperform other small, private deals, and the bias is stronger when acquirer governance is lax, suggesting that CEOs acquire private home-state targets for their own benefits. In contrast, large, public home-state acquisitions are value-enhancing. CEOs create value in public home-state acquisitions by avoiding extremely poor deals and through deals with higher synergies. Thus, both agency issues and hometown advantages drive home-state acquisitions.

Keywords: hometown bias, mergers and acquisitions, home advantage, agency problem

JEL Classification: G02, G32, G34

Suggested Citation

Jiang, Feng and Qian, Yiming and Yonker, Scott E., Hometown Biased Acquisitions (June 10, 2018). Journal of Financial and Quantitative Analysis (JFQA), Forthcoming, Available at SSRN: https://ssrn.com/abstract=2841937 or http://dx.doi.org/10.2139/ssrn.2841937

Feng Jiang

University at Buffalo - School of Management ( email )

344 Jacobs Management Center
Buffalo, NY 14260
United States
716-645-3225 (Phone)

Yiming Qian

University of Connecticut ( email )

2100 Hillside Road U-1041F, Room 452
Storrs, CT 06269
United States
860-486-2774 (Phone)

Scott E. Yonker (Contact Author)

Cornell University - SC Johnson College of Business ( email )

201J Warren Hall
Ithaca, NY 14853
United States
14853 (Fax)

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