The Impact of Geographic and Cultural Dispersion on Information Opacity

Journal of Real Estate Finance and Economics, 2019

Posted: 5 Nov 2019

See all articles by George D. Cashman

George D. Cashman

Marquette University; Texas Tech University

David M. Harrison

UCF; Texas Tech University

Michael Seiler

College of William and Mary

Hainan Sheng

University of Northern Iowa

Date Written: October 25, 2019

Abstract

This paper investigates the influences of intrafirm geographic and cultural dispersion, the distance between the location of a firm's investments and its headquarters, on the firm's information environment. Specifically, using a sample of publicly traded real estate companies across the Asia-Pacific region, we examine how intrafirm geographic and cultural distance impacts a firm's capital acquisition costs. As a consequence of both the heavily regulated operating environment faced by these firms, as well as the capital intensive nature of this industry, funding costs should be of pronounced importance to firms within this sector. Consistent with this paradigm, we find that firms with geographically disperse investments exhibit enhanced informational opacity. Specifically, firms with more egoraphically disperse investments exhibit higher capital acquisition costs than their more geographically concentrated counterparts. Similarly, firms with more culturally disparate investments also exhibit enhanced informational opacity, as evidenced by increased capital costs. Additionally, we present evidence that the impact of both physical and cultural distance is increasing following the global financial crisis. Take together, our results provide strong evidence that both intrafirm geographic and cultural dispersion materially impact both an organization's information environment and funding costs.

Keywords: Transparency; Cost of Capital; Geography; Cultural distance

JEL Classification: 370; 410; 560

Suggested Citation

Cashman, George D. and Harrison, David M. and Seiler, Michael and Sheng, Hainan, The Impact of Geographic and Cultural Dispersion on Information Opacity (October 25, 2019). Journal of Real Estate Finance and Economics, 2019, Available at SSRN: https://ssrn.com/abstract=3475608

George D. Cashman

Marquette University ( email )

College of Business Administration
P.O. Box 1881
Milwaukee, WI 53201-1881
United States
4142881448 (Phone)

Texas Tech University ( email )

2500 Broadway
Lubbock, TX 79409
United States

David M. Harrison

UCF ( email )

Orlando, FL 32816-1400
United States
407-823-1127 (Phone)

Texas Tech University ( email )

2500 Broadway
Lubbock, TX 79409
United States

Michael Seiler (Contact Author)

College of William and Mary ( email )

P.O. Box 8795
Williamsburg, VA 23185
United States

Hainan Sheng

University of Northern Iowa ( email )

Cedar Falls, IA 50614
United States

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