Too Far Away? The Effect of Distance to Headquarters on Business Establishment Performance
American Economic Journal: Microeconomics
vol. 5,
no. 3, August 2013
(pp. 157-79)
Abstract
In the population of over 1.7 million Texan sales-tax collecting business establishments, we show that greater distance to owner headquarters is associated with shorter establishment longevity. For the lodging industry, where we have revenue data, increases in distance to headquarters due to HQ-moving owners or acquisitions are associated with reductions in revenues per room. We argue that this detrimental distance effect is robust and causal, arising even when we control for the potential endogeneity of HQ distance using instrumental variable and matched pair analyses. We interpret this as evidence of monitoring and local information asymmetry problems for distant owners.Citation
Kalnins, Arturs, and Francine Lafontaine. 2013. "Too Far Away? The Effect of Distance to Headquarters on Business Establishment Performance." American Economic Journal: Microeconomics, 5 (3): 157-79. DOI: 10.1257/mic.5.3.157Additional Materials
JEL Classification
- D82 Asymmetric and Private Information; Mechanism Design
- G34 Mergers; Acquisitions; Restructuring; Voting; Proxy Contests; Corporate Governance
- L25 Firm Performance: Size, Diversification, and Scope
- R32 Other Production and Pricing Analysis
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