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Born to behave: Home CEOs and financial misconduct

Author

Listed:
  • Zicheng Lei

    (King’s College London)

  • Dimitris Petmezas

    (Durham University Business School, Durham University)

  • P. Raghavendra Rau

    (University of Cambridge)

  • Chen Yang

    (University of Glasgow)

Abstract

We examine the association between CEO birthplace proximity and financial misconduct. We find that CEOs managing firms near their birthplaces (home CEOs) are associated with less financial misconduct compared to other CEOs. This association is not attributable to differences in corporate governance. The relationship strengthens in areas with a strong local investment presence and greater religious commitment as well as among CEOs with longer tenures in their home state. Our findings are robust to addressing potential selection and omitted variable biases as well as to conducting multiple robustness tests, including analyses of involuntary CEO changes and headquarters relocations. We also find a similar association for CFOs, with firms employing home CFOs exhibiting less financial misconduct.

Suggested Citation

  • Zicheng Lei & Dimitris Petmezas & P. Raghavendra Rau & Chen Yang, 2025. "Born to behave: Home CEOs and financial misconduct," Review of Accounting Studies, Springer, vol. 30(2), pages 1309-1354, June.
    • Handle: RePEc:spr:reaccs:v:30:y:2025:i:2:d:10.1007_s11142-025-09870-y
    DOI: 10.1007/s11142-025-09870-y
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    Keywords

    CEO reputational capital; Birthplace identity; Financial misconduct; Corporate governance; Local investors;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets

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