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

KIM, WooJin / Yang, Dong-Ryung

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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.

Issue Date
2016-11
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