Geographic clustering of institutional investors

Donghyun Kim, Qinghai Wang and Xiaoqiong Wang

Journal of Financial Economics, 2022, vol. 144, issue 2, 547-570

Abstract: The U.S. money management industry is geographically concentrated and diverges from the geographic clustering of public firms. We find that firms located in states with strong institutional investor presence have high valuation. These firms invest more and their investments are less dependent on internal cash flow. They are more likely to issue equity than debt for financing needs, and local institutions hold more of the newly issued equity. The results show the geographic dislocation between institutional investors and firms contributes to financial market frictions, and a strong institutional investor presence alleviates the funding friction of local firms, leading to high valuation.

Keywords: Institutional investors; Geographic clustering; Firm valuation (search for similar items in EconPapers)
JEL-codes: G11 G23 G32 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:144:y:2022:i:2:p:547-570

DOI: 10.1016/j.jfineco.2021.08.011

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