Does Corporate Headquarters Location Matter for Firm Capital Structure?

34 Pages Posted: 31 Oct 2010

See all articles by Wenlian Gao

Wenlian Gao

Central University of Finance and Economics

Lilian Ng

Schulich School of Business, York University; European Corporate Governance Institute (ECGI)

Qinghai Wang

University of Central Florida - College of Business Administration

Date Written: July 2, 2010

Abstract

This paper studies the impact of corporate headquarters location on capital structure policies. We show that firms exhibit conformity in their financing policies to those of geographically proximate firms, and that the location of corporate headquarters helps explain the cross-sectional variation of capital structure in the United States. The location effect is robust to local credit market conditions and to state laws on corporate takeover and payout restrictions. The results suggest that non-economic factors, such as local culture and social interactions among corporate executives, play a significant role in influencing corporate financial policies of firms headquartered in the same metropolitan area.

Keywords: Capital Structure, Credit Market Condition, State Regulation, Investor Preference, Culture, Social Interaction

JEL Classification: G32

Suggested Citation

Gao, Wenlian and Ng, Lilian and Wang, Qinghai, Does Corporate Headquarters Location Matter for Firm Capital Structure? (July 2, 2010). Available at SSRN: https://ssrn.com/abstract=1700229 or http://dx.doi.org/10.2139/ssrn.1700229

Wenlian Gao (Contact Author)

Central University of Finance and Economics ( email )

39 South College Road
Beijing
China
62289220 (Phone)

Lilian Ng

Schulich School of Business, York University ( email )

N223, Seymour Schulich Building
4700 Keele Street
Toronto, Ontario ON M3J 1P3
Canada
+1.416.736.2100 x77994 (Phone)

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Qinghai Wang

University of Central Florida - College of Business Administration ( email )

PO Box 161400
Orlando, FL 32816
United States

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