Firm headquarters location, ownership structure, and stock return co-movements

Abstract

This paper investigates the link between firm headquarters location and its stock return co-movements in a full sample of Chinese listed firms from 1999 to 2007. The empirical results show a significant stock return co-movement pattern for firms located in the same province. And both firm-level factors, such as firm size and ownership structure, and provincial-level factors, including GDP per capita and the number of firms in a province, are found to be influential to this pattern. Moreover, results from a subsample of firms listed in the Shenzhen Stock Exchange show a reduction of local co-movement when firms have better information quality.