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Corporate Headquarters Relocation: Evidence from the Capital Markets

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  • Kasim L. Alli
  • Gabriel G. Ramirez
  • Kenneth Yung

Abstract

This paper assesses the stock market reaction to announcements of corporate headquarters relocations and examines financial and geographical factors related to wealth effects and factors that influence the decision to relocate corporate headquarters. The results indicate that announcements of relocations are associated with significant positive stock price effects. On average, the stock price of relocating firms increases by 1.29% during the two-day period around the announcement. Abnormal returns are positively related to the availability of labor and negatively related to the cost of living in the new location and the change in employment levels. A logit analysis indicates that the probability of a firm relocating is partially determined by the firm size and the rental expenses/sales ratio. The results also indicate that firm size, the employment/asset ratio levels, and listing in the NYSE/AMEX affect the decision to relocate to a Fortune-ranked city. Finally, firms relocating to "Fortune"-ranked cities are characterized by a high level of insider ownership relative to firms moving to non-ranked cities. Copyright American Real Estate and Urban Economics Association.

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Bibliographic Info

Article provided by American Real Estate and Urban Economics Association in its journal Real Estate Economics.

Volume (Year): 19 (1991)
Issue (Month): 4 ()
Pages: 583-600

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Handle: RePEc:bla:reesec:v:19:y:1991:i:4:p:583-600

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Cited by:
  1. Birkinshaw, Julian & Braunerhjelm, Pontus & Holm, Ulf & Terjesen, Siri, 2006. "Why Do Some Multinational Corporations Relocate Their Headquarters Overseas?," Working Paper Series in Economics and Institutions of Innovation 54, Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies.
  2. Chris Manning & Stephen E. Roulac, 2001. "Lessons from the Past and Future Directions for Corporate Real Estate Research," Journal of Real Estate Research, American Real Estate Society, vol. 22(1/2), pages 7-58.
  3. Joseph S. Rabianski & James R. DeLisle & Neil G. Carn, 2001. "Corporate Real Estate Site Selection: A Community-Specific Information Framework," Journal of Real Estate Research, American Real Estate Society, vol. 22(1/2), pages 165-198.
  4. Liang Li, 2012. "How Much Are Resource Projects Worth? A Capital Market Perspective," Economics Discussion / Working Papers 12-13, The University of Western Australia, Department of Economics.
  5. Deschryvere, Matthias, 2009. "Mobility of Corporate Headquarter Functions: A Literature Review," Discussion Papers 1203, The Research Institute of the Finnish Economy.
  6. Martha A. O’Mara, 1999. "Strategic Drivers of Location Decisions for Information-Age Companies," Journal of Real Estate Research, American Real Estate Society, vol. 17(3), pages 365-386.
  7. Chris Manning & Mauricio Rodriguez & Chinmoy Ghosh, 1999. "Devising a Corporate Facility Location Strategy to Maximize Shareholder Wealth," Journal of Real Estate Research, American Real Estate Society, vol. 17(3), pages 321-340.
  8. Tirtiroglu, Dogan & Bhabra, Harjeet S. & Lel, Ugur, 2004. "Political uncertainty and asset valuation: Evidence from business relocations in Canada," Journal of Banking & Finance, Elsevier, vol. 28(9), pages 2237-2258, September.

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