•CEOs’ hometown identity significantly lowers the consumption of excess perks.•CEOs’ hometown identity substitutes for external and internal governance mechanisms in curbing the consumption of excess perks.•The study advances research on the role of inner psychological factors in influencing agency costs and offers valuable practical implications on controlling agency costs. Our study examines whether CEOs’ hometown identity curbs or facilitates a specific type of agency cost. The results based on a sample of listed Chinese firms from 2008 to 2020 show that CEOs’ hometown identity significantly lowers the consumption of excess perks. Further analyses reveal that CEOs’ hometown identity substitutes for external and internal governance mechanisms in curbing the consumption of excess perks. The study advances research on the role of inner psychological factors in influencing agency costs and offers valuable practical implications on how to reduce the overall cost for a firm to control the agency problem.