 Do local causations matter? The effect of firm location on the relations of ROE, R&D, and firm SIZE with MARKET-TO-BOOKJournal of Corporate Finance, 2016, vol. 41, issue C, 388-409 Abstract: Firm location affects the relations of ROE, R&D, and firm SIZE with MARKET-TO-BOOK. Local parameters that are specific to the firm geographic location are estimated by weighting observations in function of their proximity. The local effect of ROE increases with the earnings quality of the neighboring firms, which is consistent with the local sharing of the accounting practices. According to value-enhancing spillover of knowledge among nearby firms, the effect of R&D is boosted by within-region R&D. Finally, the small-size effect weakens with the firm isolation, which supports the superior information of local investors. Firm location endogeneity is addressed focusing on firms operating in different industries where endogenous similarities are highly unlikely, and findings remain unchanged. Local factors shape relationships of causations and enhance effects that vary firm the firm location. Overall, local causations matter. Keywords: Firm location; Earnings quality; Knowledge spillover; Local Home Bias (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:41:y:2016:i:c:p:388-409 DOI: 10.1016/j.jcorpfin.2016.10.008 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 |
Is your work missing from RePEc? Here is how to contribute.
Questions or problems? Check the EconPapers FAQ or send mail to .
EconPapers is hosted by the
School of Business at Örebro University.