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Hometown Biased Acquisitions

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  • Jiang, Feng
  • Qian, Yiming
  • Yonker, Scott E.

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.

Suggested Citation

  • Jiang, Feng & Qian, Yiming & Yonker, Scott E., 2019. "Hometown Biased Acquisitions," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 54(5), pages 2017-2051, October.
    • Handle: RePEc:cup:jfinqa:v:54:y:2019:i:05:p:2017-2051_00
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