CEO to the Rescue: Residential Proximity of Private Firm CEOs and the Evolution of Corporate Profitability

Posted: 5 Jan 2017 Last revised: 6 Dec 2018

See all articles by Woojin Kim

Woojin Kim

Seoul National University - Business School

Dong Ryung Yang

Seojeong College

Date Written: December 30, 2016

Abstract

This paper documents how the net profit margin of private firms improves when the CEOs of the companies relocate their primary residence to be closer to the corporate headquarters. By reviewing 127 Korean non-public companies belonging to 66 private business groups, we find that the top managers move closer to the headquarters when the profitability of the firms has recently deteriorated. A one basis point decline in the margin causes CEOs to relocate their homes approximately two kilometers closer to their corporate headquarters. The profit margin rebounds after their relocation. This finding implies that physical proximity can serve as a proxy for personal commitment.

Keywords: CEO, Corporate Governance, Geographic, Commitment

JEL Classification: G30, G34, G39

Suggested Citation

Kim, Woojin and Yang, Dong Ryung, CEO to the Rescue: Residential Proximity of Private Firm CEOs and the Evolution of Corporate Profitability (December 30, 2016). KDI Journal of Economic Policy 38(4): 1-21. Available at SSRN: https://ssrn.com/abstract=2892474

Woojin Kim

Seoul National University - Business School ( email )

1 Gwanak-ro, Gwanak-gu
Seoul, 08826
Korea, Republic of (South Korea)
82-2-880-5831 (Phone)

HOME PAGE: http://cba.snu.ac.kr/en/faculty?mode=view&memberidx=60582&major=6

Dong Ryung Yang (Contact Author)

Seojeong College ( email )

Kyunggi
Korea, Republic of (South Korea)

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