Non-pecuniary Benefits: Evidence from the Location of Private Company Sales

55 Pages Posted: 13 Apr 2014 Last revised: 1 Aug 2018

See all articles by Mark Jansen

Mark Jansen

University of Utah - Department of Finance

Adam Winegar

BI Norwegian Business School

Date Written: July 30, 2018

Abstract

We estimate how the non-pecuniary benefits related to the quality-of-life (e.g., clement weather) of a target firm's location affect its acquisition price. Using new data on private firm acquisitions, we find that firms in cities with a higher quality-of-life sell for up to a 16% premium over comparable firms in cities with a lower quality-of-life. Using historical wage-to-rent differentials to instrument for the contemporaneous proxy of quality-of-life, we show that the premium for non-pecuniary amenities of a city is in addition to any premium for the economic and trade-production amenities (e.g., agglomeration economies and navigable waters) that affect firm fundamentals.

Keywords: Private Equity, Valuation, Geography, Amenities, Entrepreneurship

JEL Classification: G02, G32, G34, J32, L26, R39

Suggested Citation

Jansen, Mark and Winegar, Adam, Non-pecuniary Benefits: Evidence from the Location of Private Company Sales (July 30, 2018). Available at SSRN: https://ssrn.com/abstract=2423117 or http://dx.doi.org/10.2139/ssrn.2423117

Mark Jansen

University of Utah - Department of Finance ( email )

David Eccles School of Business
Salt Lake City, UT 84112
United States
801-213-6910 (Phone)

HOME PAGE: http://eccles.utah.edu/team/mark-jansen/

Adam Winegar (Contact Author)

BI Norwegian Business School ( email )

Nydalsveien 37
Oslo, 0442
Norway

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