The Impact of Firm Location on Equity Issuance

Tim Loughran

Financial Management, 2008, vol. 37, issue 1, 1-21

Abstract: In this paper, I use location as a proxy for the ability of a firm to issue equity. Numerous studies indicate that investors are better able to obtain information on nearby companies. I posit that costs in generating information will be higher for rural firms with few investors in their proximity, than for urban firms with many nearby investors. As predicted, I find that rural firms are less likely to conduct seasoned equity offerings than firms located in urban areas. Furthermore, I find that when a rural firm issues equity, it uses a lower‐quality underwriter than otherwise similar urban firms.

Date: 2008
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