Does Corporate Headquarters Location Matter for Firm Capital Structure?

Abstract

This paper studies the impact of corporate headquarters location on capital structure policies. We show that firms exhibit conformity in their financing policies to those of geographically proximate firms and that the location of corporate headquarters helps explain the cross‐sectional variation of capital structure in the United States. The location effect is robust to local credit market conditions and to state laws on corporate takeover and payout restrictions. The results suggest that noneconomic factors, such as local culture and social interactions among corporate executives, play a significant role in influencing corporate financial policies of firms headquartered in the same metropolitan area.