Does Corporate Headquarters Location Matter for Stock Returns?

We document strong comovement in the stock returns of firms headquartered in the same geographic area. Moreover, stocks of companies that change their headquarters location experience a decrease in their comovement with stocks from the old location and an increase in their comovement with stocks fro...

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Bibliographic Details
Published in:The Journal of finance (New York) 2006-08, Vol.61 (4), p.1991-2015
Main Authors: PIRINSKY, CHRISTO, WANG, QINGHAI
Format: Article
Language:English
Subjects:
Business structures
Business studies
Common stock
Corporate headquarters
Correlation
Economic geography
Economic indices
Economic performance
Empirical tests
Enterprises
Geodetic position
Headquarters
Impact analysis
Industrial market
Investors
Location of enterprises
Oil industry
Principal place of business
Rates of return
Regression analysis
Securities markets
Stock market indices
Stock prices
Stock returns
Studies
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Summary:We document strong comovement in the stock returns of firms headquartered in the same geographic area. Moreover, stocks of companies that change their headquarters location experience a decrease in their comovement with stocks from the old location and an increase in their comovement with stocks from the new location. The local co-movement of stock returns is not explained by economic fundamentals and is stronger for smaller firms with more individual investors and in regions with less financially sophisticated residents. We argue that price formation in equity markets has a significant geographic component linked to the trading patterns of local residents.
ISSN:0022-1082
1540-6261
DOI:10.1111/j.1540-6261.2006.00895.x