Abstract
This paper provides empirical evidence on investors′ perceptions of the relative advantages and costs of spatial agglomeration. Specifically, we examine the stock price effects of headquarters relocations. The stock market reaction is significantly positive when relocation decisions are attributed to cost savings, indicating that cost savings available at less centralized locations outweigh any loss of enhancements associated with spatial clustering at urban centers. In contrast, decisions prompted by managerial self-interest and desire for luxurious offices elicit an adverse reaction from investors.
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