The effect of CEO locality on the cost of debt financing: The role of regional heterogeneity

Zhangfan Cao, Yan Tong, Yuan Tian

Research output: Journal PublicationArticlepeer-review


We examine whether chief executive officer (CEO) locality affects firms’ cost of debt. Drawing upon place attachment theories suggesting individuals develop affective bonds with their hometowns, we find robust evidence that firms employing local CEOs tend to have a lower cost of debt than those with non-local CEOs. More importantly, we find that regional heterogeneity plays an important role in shaping the relationship from economic and cultural perspectives. The effect is more pronounced in regions where the economies and marketisation are less developed. Furthermore, we show that the effect of CEO locality is stronger in regions with collectivism and regions with low social trust. Our findings hold up to numerous robustness checks and endogeneity tests. Overall, our study highlights the prominent role of the geographically segmented CEO labour markets as an intrinsic but underexplored non-contractual factor for value creation.
Original languageEnglish
JournalRegional Studies
Publication statusPublished - 10 Nov 2023


  • local chief executive officers
  • locality
  • cost of debt
  • place attachment theory


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