Stay Concentrated to Survive

48 Pages Posted: 7 Jun 2019

See all articles by Dimitrios Gounopoulos

Dimitrios Gounopoulos

University of Bath

Chen Huang

University of Bath, School of management

Date Written: April 26, 2019


Using a text-based measure as proxy for a firm’s geographically dispersed business interests, we document that geographic dispersion increases the probability of failure risk for newly listed firms. We find that the effect is more pronounced in a soft information environment where information is not easily transferrable or verifiable over long distances, and in small communities where managerial social concerns dominate in decision-making. Moreover, we find that firms with spatially distributed business interests are negatively associated with post-IPO operating performance. Overall, the results are consistent with the argument that geographically dispersed firms are subject to internal information asymmetry and divert managerial focus away from shareholder value, which negatively affects corporate performance and eventually results in corporate failure. Our study suggests to the corporate world, stay concentrated to survive.

Keywords: initial public offerings (IPOs); firm survival; geographic dispersion; firm location

JEL Classification: G10; G33; R30

Suggested Citation

Gounopoulos, Dimitrios and Huang, Chen, Stay Concentrated to Survive (April 26, 2019). Available at SSRN: or

Dimitrios Gounopoulos

University of Bath ( email )

School of Management,
Wessex House, Claverton Down
Bath, BA2 7AY
United Kingdom

Chen Huang (Contact Author)

University of Bath, School of management ( email )

Claverton Down
Bath, BA2 7AY
United Kingdom

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