 The “home bias” of corporate subsidiary locationsYunsen Chen, Jianqiao Huang, Sheng Xiao and Ziye Zhao Journal of Corporate Finance, 2020, vol. 62, issue C Abstract: Analyzing hand-collected data on the corporate subsidiary locations of all publicly listed firms in China, we find that “hometown firms,” firms headquartered in the hometown of the key political leaders of the province, set up more subsidiaries in their home provinces. This effect is stronger for hometown firms that are non-state owned or without political connections, and more prominent in a political turnover year and the previous year. After a hometown firm sets up more subsidiaries in a key political leader's home province, the firm will enjoy more preferential government policies such as those related to subsidies and taxes. We find evidence consistent with the positive externalities of these subsidiaries for other firms in the cities where they reside, i.e., local firms. The number of these subsidiaries is also positively associated with the local employment rate. Various causality tests and robustness checks confirm the validity of our results. Our results provide some of the first evidence on the importance of corporate subsidiary locations, showing political geography significantly influences corporate geography. Keywords: Corporate subsidiary locations; Political geography; Political favoritism (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:corfin:v:62:y:2020:i:c:s0929119920300353 DOI: 10.1016/j.jcorpfin.2020.101591 Access Statistics for this article Journal of Corporate Finance is currently edited by A. Poulsen and J. Netter More articles in Journal of Corporate Finance from Elsevier |
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