Financial Structure, Acquisition Opportunities, and Firm Locations

57 Pages Posted: 27 Nov 2007 Last revised: 24 Oct 2014

See all articles by Andres Almazan

Andres Almazan

University of Texas at Austin - Department of Finance

Adolfo de Motta

McGill University - Desautels Faculty of Management

Sheridan Titman

University of Texas at Austin - Department of Finance; National Bureau of Economic Research (NBER)

Vahap Bülent Uysal

University of Oklahoma

Multiple version iconThere are 3 versions of this paper

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

Almazan, Andres and de Motta, Adolfo and Titman, Sheridan and Uysal, Vahap B., Financial Structure, Acquisition Opportunities, and Firm Locations (April 1, 2009). Journal of Finance, Forthcoming. Available at SSRN: https://ssrn.com/abstract=1032001

Andres Almazan (Contact Author)

University of Texas at Austin - Department of Finance ( email )

Red McCombs School of Business
Austin, TX 78712
United States
512-471-4368 (Phone)
512-471-5073 (Fax)

HOME PAGE: http://www.mccombs.utexas.edu/dept/finance/faculty/profiles/index.asp?addTarget=4

Adolfo De Motta

McGill University - Desautels Faculty of Management ( email )

1001 Sherbrooke St. West
Montreal, Quebec H3A1G5 H3A 2M1
Canada

Sheridan Titman

University of Texas at Austin - Department of Finance ( email )

Red McCombs School of Business
Austin, TX 78712
United States
512-232-2787 (Phone)
512-471-5073 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Vahap B. Uysal

University of Oklahoma ( email )

307 West Brooks
Norman, OK 73019-4004
United States
405-325 5672 (Phone)

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