Can Local CEOs Alleviate Corporate Financing Constraints?

For a long time,the problem of "difficult and expensive financing" has largely hindered the development of enterprises in China.According to the World Bank’s Doing Business 2020 report,China ranks 92 nd among 190 economies in terms of the ability of enterprises to obtain credit,which indicates that the financing constraint has become an important problem that restricts the development of enterprises in China.In response to the financing constraint problem,scholars at home and abroad have conducted extensive research on the influencing factors of corporate financing constraints and the ways to alleviate them from various perspectives,but little research has been conducted on how local CEOs affect financing constraints.Since the introduction of the upper echelon theory,the research on the background characteristics of executives has been intensified,and in a country with strong local sentiment like China,the hometown is an important characteristic of a person that cannot be ignored.As the core figure of the executive team,the background characteristic of whether the CEOs come from the local area of the company they serve has a significant impact on corporate financing constraints,which deserves further research.This paper compares and analyzes relevant domestic and foreign studies through literature review,and conducts theoretical analysis and derivation of research hypotheses based on upper echelon theory,agency theory,asymmetric information theory and place attachment theory.Then,this paper obtains the data required for the study with a sample of A-share listed companies from 2007-2021,and empirically investigates the impact of local CEOs on corporate financing constraints,and conducts a series of robustness tests and heterogeneity analysis.The findings of this paper find that local CEOs help alleviate the financing constraints of firms.Further heterogeneity analysis finds that the mitigation effect of local CEOs on corporate financing constraints is more significant in non-state enterprises,regions with lower levels of economic development and regions with low social trust.In the robustness tests,the robustness of the paper’s conclusions is enhanced by replacing variable measures,removing some regional samples,changing the sample intervals,propensity score matching(PSM),instrumental variables method(IV),and placebo test.Finally,further channel mechanism research finds that local CEOs alleviate corporate financing constraints mainly through the channels of increasing corporate bank loans and equity financing.The findings of this paper to some extent broaden the literature on the factors influencing financing constraints and the effects personal characteristics of executives.In addition to theoretical implications,the research in this paper provides a new perspective for enterprises to alleviate financing constraints from the perspective of individual executives,and also provides some decision-making references for enterprises to select and hire executives and local governments to formulate talent policies,which has some practical implications.