Publication Date
11-2024
Abstract
In the U.S. CEO labor market, firms are more likely to hire local CEOs than non-local CEOs. We explore the consequences of this hiring practice on voluntary disclosure of firm financial information in the non-GAAP earnings setting. Using a sample of S&P 1500 firms from 2003 to 2020, we show that firms led by local CEOs are less likely to provide non-GAAP earnings than those led by non-local CEOs. This result holds across a battery of robustness tests, including a placebo test, adopting different matching procedures, an instrumental variable approach, various regression specifications, and alternative samples using CEO turnover events. We also find evidence that when non-GAAP earnings are disclosed, the quality of non-GAAP earnings from firms with local CEOs is generally higher than those provided by firms with non-local CEOs. Our results suggest that the hiring bias towards local CEOs shapes firms’ voluntary disclosure practices.