Too Far Away? The Effect of Distance to Headquarters on Business Establishment Performance

Arturs Kalnins and Francine Lafontaine ()

American Economic Journal: Microeconomics, 2013, vol. 5, issue 3, 157-79

Abstract: In the population of over 1.7 million Texan sales-tax collecting business establishments, we show that greater distance to owner headquarters is associated with shorter establishment longevity. For the lodging industry, where we have revenue data, increases in distance to headquarters due to HQ-moving owners or acquisitions are associated with reductions in revenues per room. We argue that this detrimental distance effect is robust and causal, arising even when we control for the potential endogeneity of HQ distance using instrumental variable and matched pair analyses. We interpret this as evidence of monitoring and local information asymmetry problems for distant owners.

JEL-codes: D82 G34 L25 R32 (search for similar items in EconPapers)
Date: 2013
Note: DOI: 10.1257/mic.5.3.157
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Citations: View citations in EconPapers (94)

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