Abstract

http://ssrn.com/abstract=2064141
 
 

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Geography of Firms and Propagation of Local Economic Shocks


Gennaro Bernile


Singapore Management University - Lee Kong Chian School of Business

Stefanos Delikouras


University of Miami

George M. Korniotis


University of Miami

Alok Kumar


University of Miami - School of Business Administration

February 18, 2015


Abstract:     
This study shows that the geographical distribution of publicly-traded firms generates a network that links the economies of all U.S. states. With a novel measure of economic linkages among publicly-traded firms, we build a state-level network of economic connections. First, we show that there is strong comovement of financial shocks between connected regions. Specifically, returns and liquidity comoves across the economically connected regions. Second, we show that the economic connections aggregate and become the conduit by which local macroeconomic shocks propagate across the U.S. Specifically, we identify U.S. states that are economically relevant for firms headquartered in a state and show that the macroeconomic conditions in economically relevant states predict the economic environment in the headquarter state. These results do not reflect the impact of omitted common national shocks or industry clustering. Overall, our evidence suggest that publicly-traded firms act as transmission conduits of financial and ultimately economic shocks.

Number of Pages in PDF File: 60

Keywords: Local business cycles, geographical networks, economic links, publicly-traded firms, propagation of recessions

JEL Classification: C23, E32, E37, G10

working papers series





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Date posted: May 22, 2012 ; Last revised: February 19, 2015

Suggested Citation

Bernile, Gennaro and Delikouras, Stefanos and Korniotis, George M. and Kumar, Alok, Geography of Firms and Propagation of Local Economic Shocks (February 18, 2015). Available at SSRN: http://ssrn.com/abstract=2064141 or http://dx.doi.org/10.2139/ssrn.2064141

Contact Information

Gennaro Bernile
Singapore Management University - Lee Kong Chian School of Business ( email )
50 Stamford Road
Level 4
Singapore, 178899
Singapore
+65-68085478 (Phone)

Stefanos Delikouras
University of Miami ( email )
Coral Gables, FL 33124
United States
George M. Korniotis
University of Miami ( email )
P.O. Box 248094
Coral Gables, FL 33124-6552
United States
305-284-5728 (Phone)
Alok Kumar (Contact Author)
University of Miami - School of Business Administration ( email )
514 Jenkins Building
Department of Finance
Coral Gables, FL 33124-6552
United States
305-284-1882 (Phone)
HOME PAGE: http://moya.bus.miami.edu/~akumar
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