Leadership

Geography And The Market For CEOs

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Executive Summary

The paper examines the role of geography in the labor market for CEOs. Beginning with investigating the joint distribution of CEO state of origin and firm headquarters location and find that the frequency with which firms hire CEOs from their own state is five times more than is expected under a model where geography plays no role in the hiring process. When considering only external hiring decisions, this figure falls to just under three times. It shows that geography affects both labor supply and labor demand. Specifically, smaller, less R&D-intensive firms located in less desirable locations, with weaker board incentive alignment, and whose previous CEO was locally hired are more likely to hire local CEOs.

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