The Effect Of Geography On Firm Characteristics And The...

Literature Review The paper relates to three sets of literature: the capital structure, the location effect, and the peer effect. In the classical capital structure context, Fischer, Heinkel, and Zech-ner (1989) and Leland (1994; 1998), Hovakimian, Opler, and Titman (2001) show that firms periodically readjusts capital structures toward a target ratio. Lemmon, Roberts, Zender (2008) show that the majority of changes in leverage ratio are caused â€Å"by an unobserved time-invariant effect that generates surprisingly stable capital structures.† Lemmon et al. (2008) show that this factor is present before the IPO. They conclude, â€Å"variation in capital structures is primarily determined by factors that remain stable for long periods of time.† Recently, there has been a growing interest in studying the effect of geography on firm characteristics and financial decisions. Studies have shown that firm location affects its financing and strategic decisions. In this paper, focusing on U.S. firms, I show that headquarter location has a significant effect on capital structure. Several studies show that geographical factor has a significant effect on equity investing. Coval and Moskowitz (1999), and Grinblatt and Keloharju (2001) show that investors favor equity investments in local firms. Coval and Moskowitz (2001) â€Å"apply a geographic lens to mutual fund performance,† and find that mutual funds gain abnormal returns by investing in nearby firms. They also find that while the averageShow MoreRelatedThe Effect Of Geography On Firm s Characteristics And Financial Decisions1626 Words   |  7 Pagesliterature: the capital structure, the location effect, and the peer effects literature. In the classical capital structure context, Fischer, Heinkel, and Zech-ner (1989) and Leland (1994), (1998), Hovakimian, Opler, and Titman (2001) show that firms periodically readjusts their capital structures toward a target ratio. Lemmon, Roberts, Zender (2008) show that the majority of changes in leverage ratio is caused â€Å"by an unobserved time-invariant effect that generates surprisingly stable capital structuresRead MoreStereotype Threat On The Workplace1716 Words   |  7 Pagesthe explanation for women when they are not offered the job. Elizabeth H. Gorman conducted a study entitled â€Å"Gender Stereotypes, Same-Gender Preferences, and Organizational Variations in the Hiring of Women: Evidence from Law Firms.† In this study she measured how the effect of stereotypical conceptions of men and women affect their hiring and staffing decisions. It is our human nature to categorize people by their gender. â€Å"Sex categorization†¦triggers two important processes: the application of culturalRead MoreGang Involvement : Membership, Violence, Crime And Juvenile Delinquency3474 Words   |  14 Pagesmanagement, commitment to school, and deviant peers. 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