Stay home, stay safe: CEO hometown identity and default risk

Xinghe Liu, Weifeng Zhong and Jing Chen

Finance Research Letters, 2023, vol. 57, issue C

Abstract: Motivated by the understudied role of CEO hometown identity in the credit market, our study, grounded in place identity theory, examines whether CEO hometown identity lowers or raises firms’ default risk. Our results, based on a sample of listed Chinese firms from 2008 to 2020, show that CEO hometown identity significantly curbs default risk; this finding holds after a battery of robustness tests that address endogeneity concerns. Further analyses reveal that this effect is realized through hometown CEOs’ reputation concern and capabilities to alleviate financial constraints. Overall, our study highlights the positive role of CEO hometown identity from debtholders’ perspectives and offers valuable practical implications on how to control default risk.

Keywords: Hometown identity; Default risk; Reputation concern; Financial constraints (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:57:y:2023:i:c:s1544612323005639

DOI: 10.1016/j.frl.2023.104191

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