Selfish or selfless: the impact of hometown executives on corporate cash holdings

Hometown employment is a significant informal institution that affects executives’ behaviour. This study investigates the impact of hometown executives on corporate cash holdings. The findings reveal that hometown executives reduce corporate cash holdings. This reduction arises from the resource and governance effects attributed to the selflessness of hometown executives, which alleviate corporate financing constraints and agency costs. Heterogeneity analysis shows that these effects are more pronounced in firms with older executives, lower information transparency, and stronger regional vernacular cultures. Additionally, hometown employment effectively supplements the formal corporate governance system. Hometown executives optimise financial resource allocation, reducing cash holdings without increasing operational risks. They direct corporate cash towards social donation initiatives. This study reveals the altruistic motivations of hometown executives in corporate governance, providing insights for managerial selection and the role of informal institutions in economic development.