Geography of Firms and Propagation of Local Economic Shocks
68 Pages Posted: 22 May 2012 Last revised: 4 Dec 2017
Date Written: December 3, 2017
Using information from 10-K filings of public firms, we identify economic connections among U.S. states. At the firm level, we document excess comovement in 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 1% production shock in California is related to a 6.71% change in annual U.S. GDP growth, relative to the average GDP growth. Collectively, the geographic network of public firms facilitates the propagation of local shocks across the U.S. economy.
Keywords: Economic networks, 10-K filings, U.S. states, Gross State Product (GSP), predictability
JEL Classification: C23, E32, E37, G10
Suggested Citation: Suggested Citation