Geography of Firms and Propagation of Local Economic Shocks

67 Pages Posted: 22 May 2012 Last revised: 21 May 2016

Gennaro Bernile

University of Miami - School of Business Administration

Stefanos Delikouras

University of Miami

George M. Korniotis

University of Miami

Alok Kumar

University of Miami - School of Business Administration

Date Written: May 20, 2015

Abstract

We use information from 10-K filings to identify economic connections among U.S. states. These connections provide a measure of economic distance that does not merely reflect physical proximity or industry connections. At the firm level, there is excess comovement in the returns and liquidity of firms headquartered in economically connected states. At the aggregate level, the economic connections create spillover effects whereby economic shocks in a state affect its connected states and the U.S. economy. For example, a one percent production shock in California (Texas) is related to a 6.71 (5.62) percent change in annual U.S. GDP growth, relative to the average GDP growth. Collectively, the network of publicly-traded firms generates a channel that facilitates the propagation of local shocks across the U.S. economy.

Keywords: Economic networks, 10-K reports, U.S. states, Gross state product (GSP), predictability

JEL Classification: C23, E32, E37, G10

Suggested Citation

Bernile, Gennaro and Delikouras, Stefanos and Korniotis, George M. and Kumar, Alok, Geography of Firms and Propagation of Local Economic Shocks (May 20, 2015). Available at SSRN: https://ssrn.com/abstract=2064141 or http://dx.doi.org/10.2139/ssrn.2064141

Gennaro Bernile

University of Miami - School of Business Administration ( email )

5250 University Dr
Coral Gables, FL 33146
United States

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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