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Geography of firms and propagation of local economic conditions

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  • Gennaro Bernile
  • Stefanos Delikouras
  • George M. Korniotis
  • Alok Kumar

Abstract

This study shows that the geographic network of public firms facilitates the propagation of local economic conditions across the United States. We identify economic connections among U.S. states based on the 10‐K listings of public firms and show that the returns and liquidity of firms headquartered in connected states exhibit excess comovement. The economic connections also generate spillover effects where the economy of a state affects its connected states and amplifies the impact of local economic conditions on the U.S. economy. In particular, a 1% production increase in a large state like California is associated with a 6.71% change in annual U.S. GDP growth, relative to average GDP growth.

Suggested Citation

  • Gennaro Bernile & Stefanos Delikouras & George M. Korniotis & Alok Kumar, 2023. "Geography of firms and propagation of local economic conditions," Review of Financial Economics, John Wiley & Sons, vol. 41(4), pages 437-464, October.
    • Handle: RePEc:wly:revfec:v:41:y:2023:i:4:p:437-464
    DOI: 10.1002/rfe.1191
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