Financial Structure, Acquisition Opportunities, and Firm Locations
57 Pages Posted: 27 Nov 2007 Last revised: 24 Oct 2014
There are 3 versions of this paper
Financial Structure, Acquisition Opportunities, and Firm Locations
Financial Structure, Liquidity, and Firm Locations
Financial Structure, Liquidity, and Firm Locations
Date Written: April 1, 2009
Abstract
This paper investigates the relation between firms’ locations and their corporate finance decisions. We develop a 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 located within industry clusters make more acquisitions, and have lower debt ratios and larger cash balances than their industry peers located outside clusters. We also document that firms in high tech cities and growing cities also maintain more financial slack. Overall the evidence suggests that growth opportunities influence firms’ financial decisions.
Keywords: Capital structure, firm location, cash balances, asset liquidity, mergers and acquisitions
JEL Classification: G32, G34, R30
Suggested Citation: Suggested Citation
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