Home away from Home: Geography of Information and Local Investors

Gennaro Bernile, Alok Kumar, Johan Sulaeman

Research output: Contribution to journalArticle

19 Citations (Scopus)

Abstract

We develop a 10-K-based multidimensional measure of firm locations. Using this measure, we show that firm-level information is geographically distributed and institutional investors are able to exploit the resulting information asymmetry. Specifically, institutional investors overweigh firms whose 10-K frequently mentions the investors' state even when those firms are not headquartered locally and earn superior returns on those stocks. These ownership and performance patterns are stronger among hard-to-value firms. Local investor performance increases with the degree of local bias and with the local economic exposure of portfolio firms. Overall, geographical variation in firm-level information generates economically significant location-based information asymmetry.

Original languageEnglish (US)
Pages (from-to)2009-2049
Number of pages41
JournalReview of Financial Studies
Volume28
Issue number7
DOIs
StatePublished - Jul 1 2015

Fingerprint

Geography
Investors
Institutional investors
Information asymmetry
Headquarters
Ownership
Geographical variation
Local bias
Firm value
Firm location
Economic exposure

Keywords

  • G11
  • G12
  • G23

ASJC Scopus subject areas

  • Finance
  • Accounting
  • Economics and Econometrics

Cite this

Home away from Home : Geography of Information and Local Investors. / Bernile, Gennaro; Kumar, Alok; Sulaeman, Johan.

In: Review of Financial Studies, Vol. 28, No. 7, 01.07.2015, p. 2009-2049.

Research output: Contribution to journalArticle

@article{76e19fe0e09a4ab5ab3ebaa294a2f343,
title = "Home away from Home: Geography of Information and Local Investors",
abstract = "We develop a 10-K-based multidimensional measure of firm locations. Using this measure, we show that firm-level information is geographically distributed and institutional investors are able to exploit the resulting information asymmetry. Specifically, institutional investors overweigh firms whose 10-K frequently mentions the investors' state even when those firms are not headquartered locally and earn superior returns on those stocks. These ownership and performance patterns are stronger among hard-to-value firms. Local investor performance increases with the degree of local bias and with the local economic exposure of portfolio firms. Overall, geographical variation in firm-level information generates economically significant location-based information asymmetry.",
keywords = "G11, G12, G23",
author = "Gennaro Bernile and Alok Kumar and Johan Sulaeman",
year = "2015",
month = "7",
day = "1",
doi = "10.1093/rfs/hhv004",
language = "English (US)",
volume = "28",
pages = "2009--2049",
journal = "Review of Financial Studies",
issn = "0893-9454",
publisher = "Oxford University Press",
number = "7",

}

TY - JOUR

T1 - Home away from Home

T2 - Geography of Information and Local Investors

AU - Bernile, Gennaro

AU - Kumar, Alok

AU - Sulaeman, Johan

PY - 2015/7/1

Y1 - 2015/7/1

N2 - We develop a 10-K-based multidimensional measure of firm locations. Using this measure, we show that firm-level information is geographically distributed and institutional investors are able to exploit the resulting information asymmetry. Specifically, institutional investors overweigh firms whose 10-K frequently mentions the investors' state even when those firms are not headquartered locally and earn superior returns on those stocks. These ownership and performance patterns are stronger among hard-to-value firms. Local investor performance increases with the degree of local bias and with the local economic exposure of portfolio firms. Overall, geographical variation in firm-level information generates economically significant location-based information asymmetry.

AB - We develop a 10-K-based multidimensional measure of firm locations. Using this measure, we show that firm-level information is geographically distributed and institutional investors are able to exploit the resulting information asymmetry. Specifically, institutional investors overweigh firms whose 10-K frequently mentions the investors' state even when those firms are not headquartered locally and earn superior returns on those stocks. These ownership and performance patterns are stronger among hard-to-value firms. Local investor performance increases with the degree of local bias and with the local economic exposure of portfolio firms. Overall, geographical variation in firm-level information generates economically significant location-based information asymmetry.

KW - G11

KW - G12

KW - G23

UR - http://www.scopus.com/inward/record.url?scp=84937432550&partnerID=8YFLogxK

UR - http://www.scopus.com/inward/citedby.url?scp=84937432550&partnerID=8YFLogxK

U2 - 10.1093/rfs/hhv004

DO - 10.1093/rfs/hhv004

M3 - Article

AN - SCOPUS:84937432550

VL - 28

SP - 2009

EP - 2049

JO - Review of Financial Studies

JF - Review of Financial Studies

SN - 0893-9454

IS - 7

ER -