Does the CEOs’ hometown identity matter for firms’ environmental, social, and governance (ESG) performance?

Abstract

<p xmlns:xsi="http://www.w3.org/2001/XMLSchema-instance" class="first" dir="auto" id="d12318082e77">The environmental, social, and governance (ESG) performance is a vital pursuit of firms' strategy and has caused substantial influences on firms' behavior and outcomes. Therefore, exploring how to facilitate the firms' ESG performance is necessary. This paper examines the role of CEOs' hometown identity in facilitating firm's ESG performance. Based on a sample of Chinese listed firms during 2010-2018, we compare the ESG performance of firms with hometown CEO with that of firms without hometown CEO and find that CEOs' hometown identity is associated with significantly higher ESG performance. The benchmark results still hold after instrumental variable regression, placebo test, propensity score matching, lagging, and altering the measurement of CEOs' hometown identity. Additional analysis shows that CEOs' hometown identity exerts a more prominent positive effect on ESG performance among firms with higher financing constraints and SOEs. Our findings reveal a bright side of CEOs' hometown identity: it facilitates ESG performance. Therefore, this paper's conclusion sheds new light on the bright side of CEOs' hometown identity from the perspective of firms' ESG performance and provides insights into how to improve ESG performance. </p>