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Corporate Headquarters Relocation: Evidence from the Capital Markets
Author(s) -
Alli Kasim L.,
Ramirez Gabriel G.,
Yung Kenneth
Publication year - 1991
Publication title -
real estate economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.064
H-Index - 61
eISSN - 1540-6229
pISSN - 1080-8620
DOI - 10.1111/1540-6229.00569
Subject(s) - relocation , insider , stock (firearms) , renting , business , insider trading , stock price , economics , labour economics , monetary economics , finance , mechanical engineering , paleontology , series (stratigraphy) , computer science , political science , law , biology , programming language , engineering
This paper assesses the stock market reaction to announcements of corporate headquarters relocations and examines financial and geographical factors related to wealth effects and factors that influence the decision to relocate corporate headquarters. The results indicate that announcements of relocations are associated with significant positive stock price effects. On average, the stock price of relocating firms increases by 1.29% during the two‐day period around the announcement. Abnormal returns are positively related to the availability of labor and negatively related to the cost of living in the new location and the change in employment levels. A logit analysis indicates that the probability of a firm relocating is partially determined by the firm size and the rental expenses/sales ratio. The results also indicate that firm size, the employment/asset ratio levels, and listing in the NYSE/AMEX affect the decision to relocate to a Fortune‐ranked city. Finally, firms relocating to Fortune ‐ranked cities are characterized by a high level of insider ownership relative to firms moving to non‐ranked cities.