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The Impact of Firm Location on Equity Issuance

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  • Tim Loughran

Abstract

In this paper, I use location as a proxy for the ability of a firm to issue equity. Numerous studies indicate that investors are better able to obtain information on nearby companies. I posit that costs in generating information will be higher for rural firms with few investors in their proximity, than for urban firms with many nearby investors. As predicted, I find that rural firms are less likely to conduct seasoned equity offerings than firms located in urban areas. Furthermore, I find that when a rural firm issues equity, it uses a lower‐quality underwriter than otherwise similar urban firms.

Suggested Citation

  • Tim Loughran, 2008. "The Impact of Firm Location on Equity Issuance," Financial Management, Financial Management Association International, vol. 37(1), pages 1-21, March.
    • Handle: RePEc:bla:finmgt:v:37:y:2008:i:1:p:1-21
    DOI: 10.1111/j.1755-053X.2008.00004.x
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