Abstract

http://ssrn.com/abstract=2064141
 
 

References (23)



 
 

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Geography of Firms and Propagation of Local Economic Shocks


Gennaro Bernile


Singapore Management University - Lee Kong Chian School of Business

George M. Korniotis


University of Miami

Alok Kumar


University of Miami - School of Business Administration

April 15, 2013


Abstract:     
This study shows that the geographical distribution of publicly-traded firms generates an economic network that links the economic environments of all U.S. states. Using a novel measure of economic linkages among publicly-traded firms, we build a state-level network of economic connections and show that local economic shocks propagate through this geographical network. Specifically, for each state, we identify U.S. states that are economically relevant for firms headquartered in that state and show that economic conditions in economically relevant states predict the economic environment in the headquarter state. These results do not merely reflect the impact of omitted common national shocks. Using monetary losses from state-level natural disasters as an instrument, we show that state-level economic shocks propagate through the economic network generated by public companies. Overall, this evidence has important implications for the evaluation of targeted government policies such as the recent hurricane relief or bailout programs.

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

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Date posted: May 22, 2012 ; Last revised: November 12, 2013

Suggested Citation

Bernile, Gennaro and Korniotis, George M. and Kumar, Alok, Geography of Firms and Propagation of Local Economic Shocks (April 15, 2013). 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)

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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