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  • P-ISSN 2586-2995
  • E-ISSN 2586-4130
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KDI Journal of Economic Policy. Vol. 38, No. 4, December 2016, pp. 1-21

https://doi.org/10.23895/kdijep.2016.38.4.1

× KDI Open Access is a program of fully open access journals to facilitate the widest possible dissemination of high-quality research. All research articles published in KDI JEP are immediately, permanently and freely available online for everyone to read, download and share in terms of the Creative Commons Attribution 4.0 International License.

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

WOO JIN KIM; DONG-RYUNG YANG

Author & Article History

Manuscript received 27 June 2016; revision received 01 July 2016; accepted 21 October 2016.

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.

Keywords

CEO, Corporate Governance, Geographic, Commitment

JEL Code

G30, G34, G39

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