Title: Neighborhood Firms (with Mario Daniele Amore (Bocconi) and Birthe Larsen(CBS))
Abstract: The quality of work environment is a key driver of firms’ success. In this paper, we study how CEOs’ localness shapes the work environment. Using unique data from Denmark, we show that when the CEO lives closer to the headquarter, the firm exhibits better workplace conditions. This effect is stronger when the firm’s employees live close to the company as well, suggesting that the result is primarily driven by social interactions. To validate this mechanism, we show that the quality of work environment increases when the CEO and employees’ children attend the same school. We complement these findings with survey evidence on the role of cultural values in management: CEOs who prioritize neighborhood engagement lead firms with a better workplace, and adopt a management style tilted toward employees’ welfare.