Home away from Home: Geography of Information and Local Investors

Gennaro Bernile, Alok Kumar, Johan Sulaeman

Research output: Contribution to journalArticle

25 Scopus citations

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

Keywords

  • G11
  • G12
  • G23

ASJC Scopus subject areas

  • Finance
  • Accounting
  • Economics and Econometrics

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