Urban Vibrancy and Corporate Growth
University of North Carolina (UNC) at Chapel Hill - Kenan-Flagler Business School
Christopher A. Parsons
University of California, San Diego (UCSD)
University of Texas at Austin - Department of Finance; National Bureau of Economic Research (NBER)
February 29, 2012
We provide evidence that positive local spillovers strongly influence corporate investment decisions. A firm's investment is highly sensitive to the investments of other firms headquartered nearby, even those in very different industries. Moreover, a firm's investment is also related to the q and cash flows of nearby firms outside its industry, even when controlling for its own q and cash flows. Similar correlations are observed for capital raising, both debt and equity. These time-varying regional effects are large, averaging over half the size of the typical time-varying industry effect, and indicate that local agglomeration economies are important determinants of firm investment and growth.
Number of Pages in PDF File: 66
Keywords: agglomeration economies, spillovers, investment, equity issuance, human capital
JEL Classification: G30, R30working papers series
Date posted: March 18, 2012
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