CEO Hometown Preference in Corporate Environmental Policies

We exploit within-firm variations in plant-level toxic releases to examine the effect of managerial hometown preference on corporate environmental policies. We find that pollution levels are about 30% lower for plants located near chief executive officers’ (CEOs’) hometowns. This reduction is achieved through resource-intensive pollution control efforts, including source reduction and waste management activities. Analyses using CEO turnover provide causal inferences. Local residents benefit from CEO hometown pollution reduction as localities hosting more hometown plants experience improved environmental conditions and better residential health outcomes. On the other hand, some evidence suggests that CEOs’ hometown preference is related to agency frictions. Overall, our findings reveal the impact of CEOs’ personal motivations on corporate pollution dynamics and their consequential effects on the well-being of local communities. This paper was accepted by Ranjani Krishnan, accounting. Funding: Q. Xu gratefully acknowledges research support from the University of Illinois Urbana-Champaign. Supplemental Material: The online appendix and data files are available at https://doi.org/10.1287/mnsc.2022.02560 .