Investment in a Smaller World: The Implications of Air Travel for Investors and Firms

Zhi Da (), Umit G. Gurun (), Bin Li () and Mitch Warachka ()
Additional contact information
Zhi Da: University of Notre Dame, Notre Dame, Indiana 46556;
Umit G. Gurun: University of Texas at Dallas, Richardson, Texas 75080;
Bin Li: University of Oklahoma, Norman, Oklahoma 73019;
Mitch Warachka: Chapman University, Orange, California 92866

Management Science, 2021, vol. 67, issue 1, 417-435

Abstract: A large literature reports that proximity influences investment. We extend the measurement of proximity beyond distance and report that air travel reduces local investment bias. This result is confirmed using the initiation of connecting flights through recently opened air hubs because investment at destinations served by these connecting flights increases after, not before, their initiation. Air travel also broadens the investor base of firms and lowers their cost of equity by approximately 1%. Overall, air travel improves the diversification of investor portfolios and lowers the cost of equity for firms.

Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

Downloads: (external link)
https://doi.org/10.1287/mnsc.2019.3452 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:inm:ormnsc:v:67:y:2021:i:1:p:417-435

Access Statistics for this article

More articles in Management Science from INFORMS Contact information at EDIRC.
Bibliographic data for series maintained by Chris Asher ().