The Impact of Firm Location on Equity Issuance


  • I would like to thank Robert Battalio, Jeffrey Bergstrand, Jeffrey Harris, Roger Huang, Marcin Kacperczyk, Jerry Langley, Jay Ritter, Paul Schultz, an anonymous referee, and seminar participants at the Universities of Colorado, Notre Dame, and the 2006 FMA meeting for comments. I am grateful to Kim Lavene, Betsy Laydon, Hang Li, Kim Lorenzen, and Sebastian Rubano for research assistance.


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.