CEO to the Rescue: Residential Proximity of Private Firm CEOs and the Evolution of Corporate Profitability
- CEO to the Rescue: Residential Proximity of Private Firm CEOs and the Evolution of Corporate Profitability
- KIM, WooJin; Yang, Dong-Ryung
- Issue Date
- 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.
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