Geographic Spillover of Dominant Firms' Shocks

82 Pages Posted: 26 Jan 2017 Last revised: 29 Oct 2020

See all articles by Sima Jannati

Sima Jannati

University of Texas at Arlington

Date Written: March 6, 2020


This paper shows that productivity shocks to the 100 largest U.S. firms (by revenue) contain systematic information. Specifically, shocks to the top-100 firms predict future shocks to geographically close firms. Intra-sector trade links are an important economic channel for spillover effects. However, these spillovers are not restricted to firms' trade links only. Knowledge externalities and state income tax payments of the top-100 firms are other economic channels through which shocks propagate. Market participants do not fully incorporate the information contained in shocks to the top-100 firms. Consequently, a portfolio analysis that exploits the slow diffusion of information generates an annual risk-adjusted return of 5.4%. Overall, the results show how productivity shocks to the few largest firms in the U.S. spillover to other firms and potentially aggregate to affect the national economy.

Keywords: Top-100 firms; productivity shocks; systematic information; geographic spillover; information diffusion

JEL Classification: G02; G14; G24

Suggested Citation

Jannati, Sima, Geographic Spillover of Dominant Firms' Shocks (March 6, 2020). 8th Miami Behavioral Finance Conference 2017, 2019 Academic Research Colloquium for Financial Planning and Related Disciplines, Journal of Banking and Finance, Vol. 118, 2020, Available at SSRN: or

Sima Jannati (Contact Author)

University of Texas at Arlington ( email )

701 S. West Street
Arlington, TX 76019
United States

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