Financial Structure, Liquidity, and Firm Locations

Andres Almazan, Adolfo de Motta, Sheridan Titman and Vahap Uysal

No 13660, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper investigates the relation between a firm's location and its corporate finance decisions. We develop a simple model where being located within an industry cluster increases opportunities to make acquisitions, and to facilitate those acquisitions, firms within clusters maintain more financial slack. Consistent with our model we find that firms that are located within industry clusters tend to make more acquisitions, and have lower debt ratios and larger cash balances than their industry peers located outside clusters. In addition, we document that firms in growing cities and technology centers also maintain more financial slack. Overall, these findings, which reveal systematic patterns between geography and corporate finance choices, suggest the importance of growth opportunities in firms' financial decisions.

JEL-codes: G30 G32 G34 R3 (search for similar items in EconPapers)
Date: 2007-12
New Economics Papers: this item is included in nep-bec, nep-geo and nep-ure
Note: CF
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Citations: View citations in EconPapers (4)

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