Geographic Spillovers and Corporate Decisions

33 Pages Posted: 11 Jul 2016

See all articles by John E. Core

John E. Core

Massachusetts Institute of Technology (MIT) - Sloan School of Management

Inna Abramova

London Business School

Rodrigo S. Verdi

Massachusetts Institute of Technology (MIT)

Date Written: July 8, 2016

Abstract

We investigate the association between geographic spillovers and corporate investment and accruals decisions. We hypothesize that if geographic areas differ by the degree of information sharing among local people, then the quality of managerial decisions can be affected by higher information flow in high-spillover areas. We construct a measure of geographic spillover intensity based on distances among firms in a metropolitan statistical area and test whether geographic spillovers are related to (1) the similarity and (2) the quality of corporate decisions. The findings indicate that in high-spillover areas, managers’ investment and accruals decisions are more similar and have better quality than in low-spillover areas. Our findings contribute to a growing literature on the role of geographic information flow and its effect on corporate outcomes.

Keywords: geographic spillovers, investment, accruals, similarity, quality, corporate policy, density, metropolitan area

Suggested Citation

Core, John E. and Abramova, Inna and Verdi, Rodrigo S., Geographic Spillovers and Corporate Decisions (July 8, 2016). Available at SSRN: https://ssrn.com/abstract=2807477 or http://dx.doi.org/10.2139/ssrn.2807477

John E. Core

Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )

100 Main Street
E62-416
Cambridge, MA 02138
United States

Inna Abramova (Contact Author)

London Business School

Regent's Park
London, NW1 4SA
United Kingdom

Rodrigo S. Verdi

Massachusetts Institute of Technology (MIT) ( email )

Sloan School of Management
100 Main Street E62-666
Cambridge, MA 02142
United States
(617) 253 2956 (Phone)

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