Abstract
We show that chief executive officers (CEOs) exhibit a hometown bias in acquisitions. Firms are over twice as likely to acquire targets located in the states of their CEOs' childhood homes than similar targets domiciled elsewhere. Small, private home-state deals underperform other small, private deals, and the bias is stronger when acquirer governance is lax, suggesting that CEOs acquire private home-state targets for their own benefits. In contrast, large, public home-state acquisitions are value enhancing. CEOs create value in public home-state acquisitions by avoiding extremely poor deals and through deals with higher synergies. Thus, both agency issues and hometown advantages drive home-state acquisitions.
| Original language | English |
|---|---|
| Pages (from-to) | 2017-2051 |
| Number of pages | 35 |
| Journal | Journal of Financial and Quantitative Analysis |
| Volume | 54 |
| Issue number | 5 |
| DOIs | |
| State | Published - Oct 1 2019 |
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