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Does Regional Identity Guide Investments? Evidence from German license plates

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  • Huning, Thilo
  • Wahl, Fabian

Abstract

In this paper, we present novel data from the German-speaking area on 13,422 venture capital investments between 1999 and 2019, and document a novel and yet unexplained contributor to investors' home bias. We propose a new measure of regional identity based on a recent vehicle license plate liberalization in Germany, and leverage on a unique dataset of historical borders to examine how regional identity is formed. We use an instrumental strategy to establish a causal link between historical political instability, regional identity, and the home bias. Our results indicate that a common regional identity is highly relevant for investment decisions.

Suggested Citation

  • Huning, Thilo & Wahl, Fabian, 2023. "Does Regional Identity Guide Investments? Evidence from German license plates," CEPR Discussion Papers 18074, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:18074
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    More about this item

    Keywords

    Behavioral finance; Home bias; Venture capital; Start-ups; Culture; Instability;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets
    • N20 - Economic History - - Financial Markets and Institutions - - - General, International, or Comparative
    • Z19 - Other Special Topics - - Cultural Economics - - - Other

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